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Our Guide to Responsible Borrowing

Whether purchasing your first home or buying another investment property, deciding to take out a home loan isn’t something you should rush into. Before you make the decision, be sure to consider the points below so you can be safe in the knowledge that you are borrowing responsibly.

Understand Your Obligations

It’s important that you don’t sign any documents until you’re sure you fully understand all the terms and conditions of your loan. Make sure you are aware of what is at risk and what will happen if you have to default on a payment. Borrowing money is a serious responsibility, so choose a loan from a company that makes their interest rates and fees clear to you from the start.

Understand the Risks

New property investors can get carried away with the belief that property prices only go up, forgetting there are always risks you should consider and prepare for. Making well-informed decisions and avoiding financial over-commitment can reduce most of these risks. If the market depreciates your property while you are financially over-committed, you may be forced to sell, losing significant amounts of money.

Many investors take advantage of the leverage they can access to purchase more investments, resulting in better overall returns. However, it’s important to remember that leveraging also intensifies risk if house prices drop.

Make Sure You Can Afford Your Home Loan

Make a list of all of your sources of income and all your expected outgoings for the next month, and make sure that there will be funds left over for your repayments. If these numbers don’t add up, then don’t take out a loan that you can’t afford as this will end up costing you more in the long run. Lenders will usually determine whether you can service a loan, but you shouldn’t just rely on their assessment. No one understands your financial position like you do.

Plan Your Repayments

Once you’re sure you can afford the loan, make sure you know exactly how much your repayment instalments will be, and when they are due. Use this information to inform your budget for the month so you don’t end up being caught short.

Get the Right Home Loan

Not enough property investors are thinking about how to structure their mortgages, potentially causing them to incur more costs than necessary. Finding the right mortgage structure for your personal circumstances is essential, whether it’s principal and interest, interest only or revolving credit. Consult an expert mortgage broker before purchasing your next property to determine the right home loan option for you.

Contact Mortgage Masters – Independent Brokers in Auckland

Mortgage Masters are your independent mortgage brokers in Auckland, servicing the community in home loans since 1998 to find our clients the best deal on the market. If you need tailored financial advice or helping finding the right home loan for your needs, please get in touch with our team today.

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