Congratulations on the achievement! Choosing to buy a house means you’ve already begun the process, saved money, researched what you’re looking for and begun to plan. Here at Mortgage Masters in Auckland, we help a first home buyer with mortgages in Auckland, including understanding which one is right for you and how you can get the best deal. That’s why we’ve outlined some tips and facts you should know when you’re starting to research what house mortgage is the best fit for you and your priorities. We have also outlined some common terms that you’ll need to understand when choosing a house mortgage, so you can bypass all the confusion and frantic Googling.
Is a Home Loan and a Mortgage the Same?
Firstly, you must understand the difference between a home loan and a mortgage. When your home loan is approved, the property is served as collateral to secure the loan. A mortgage is a document that legally protects a lender’s security over the property that they’ve just given you the money to buy. When your home loan is repaid, the mortgage is gone.
Understand What the Lender is Looking For
Before you can secure a home loan, you’ll need to know the ins and outs of what a lending party will be looking for. Do you have secure, full-time employment? How much savings do you have? What are your spending habits like? If you have the money but not the employment, you may not be able to secure a home loan. Likewise, if you have employment but your spending habits don’t show up as positive, the lender won’t trust you with the loan. It may be a good idea to calculate the type of repayments that you will be repaid in the future and begin to save that amount while monitoring your spending. This will show the lender that you can save and don’t have any extraneous or unnecessary spending habits.
Principal & Interest Loans vs. Interest Only Loans
Most people opt for a principal and interest home loan. This means that you make regular repayments on the amount borrowed (the principal) plus interest on that amount. You pay off the loan over an agreed period of time (which is called a loan term) for, typically, 25 or 30 years. An interest-only loan means that for an initial period, your repayments only cover the interest on the amount borrowed. This means that you aren’t paying off the principal you borrowed, so your debt isn’t reduced. Repayments may be lower during the interest-only period, but they will go up after that.
Get the Shortest Loan Term You Can Afford
Your loan term is how long you have to pay off the loan. This impacts the size of your mortgage repayments and how much interest you’ll pay. A shorter loan term means higher repayments, but less interest. A longer loan term means lower repayments, but you’ll pay more in interest. Think about what you can afford and how long you want to be paying off the home loan.
Choose a Great Mortgage Broker in NZ
For more advice about mortgages in Auckland for a first home buyer, feel free to contact the expert mortgage broker in NZ, here at Mortgage Masters. We offer our clients a free consultation, so you can understand the whole process and get started on making your dreams a reality!