Your ability to attain credit, whether secured or unsecured is affected by your credit rating or credit worthiness. The better your rating, the more likely the bank is to extend credit to you and the more likely that you will receive favourable terms. Your rating is based on how much debt you have and how well you service (repay) this debt.
High levels of unsecured debt (credit card or personal loans) will affect your mortgage loan application. Your ability to service your monthly bond instalment is weakened by your obligation to service your credit card, personal loan or even clothing accounts. The bank takes all debt into consideration when you apply for any loan.
Mortgage loan considerations
The following key factors are important to consider:
Affordability
Deposit
Property usage
For individuals, the most common uses for property are 1) as a primary residence or 2) as an investment, typically for rental income purposes.
- Primary residence: the house that you and your family intend to reside in. First-time buyers are able to secure 100% funding from the bank. Interest rates are more favourable as the risk of default decreases on a primary residence.
- Investment property: a secondary house used for rental purposes. Often a deposit of 10% or 20% is required but this could increase depending on how many properties you may add as you build your property portfolio. The rate applied to these deals are generally not as favourable as that of primary residence rates.
Interest rate
Fees
- Initiation fees: this is the fee charge by the bank
- Valuation fee: where a desktop property valuation cannot be done, physical property valuation fees are charged
- Bond registration fee: charged by the attorneys appointed by the bank to register the bond in your name
- Transfer fee: the fee charged by the attorneys appointed by the seller to transfer the property from their name to yours. Historically, these fees were not capitalised and had to be paid as a lump sum amount by the purchaser, but banks are now capitalising these costs for first time homeowners
We assist our wau family-office clients with commercial and investment property transactions. Contact Dale Petersen on 021 819 7802 or 066 165 9019 to find out more about our family-office offering.
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