Getting ready to buy your first home? This is an exciting time, but it can also be an overwhelming one. Even though taking out a mortgage on a home is something that you probably grew up expecting to do, there are still a lot of complexities within the process, many of which are easy to overlook.

In fact, here are a few important facts you might not know about mortgages. Any of these could trip you up and make life more difficult if you are not aware of them in advance.

1. When looking at interest rate it’s always best to look at the “Comparison/ True Rate” interest rate

A lot of first-time home buyers look at the mortgage rate when considering how much house they can afford, but they do not realise this does not really provide them with a full picture.

You can get a much better feel for the real cost of purchasing a home by looking at the true rate or comparison rate.  This rate covers not only the mortgage premiums and interest rate, but also accounts for origination and closing fees, mortgage points, and other costs.

2. If you want the best rates and the lowest fees, its best to go through a Mortgage Broking Specialist

A Mortgage Broker acts as an intermediary for you and the bank. They have a range of access to different financial institutions and can recommend a loan for you based on your goals and needs. Once they source the best option available to you they will ensure that the process from pre-approval to settlement is as seamless as possible.

3. Mortgage pre-approval to act quickly in this market environment

Looking to buy a home in Sydney?  This is a very competitive market, so it’s best to get a pre approval in place before attending open houses and Auctions. This will give you the peace of mind that if the perfect property comes up, you know what your maximum borrowing capacity is and you can sign the contract or make a bid with the pre-approval already in place. At Nexia we can assist you with the pre-approval application process.

4. If your down payment is less than 20% of the home’s purchase price, you will need Lenders Mortgage Insurance (LMI)

It’s great if you can get away with a lower down payment, but you need to know that it comes with a cost in the form of Lenders Mortgage Insurance (LMI). This is a once off lump sum cost you will have to pay and is in addition to the deposit and stamp duty payable on the property. This may allow you to achieve your dream of owning a home sooner, however if the deposit is under the 20% mark then this usually comes with a higher interest rate.

5. Be aware of any additional costs

Finally, one more thing that you may not realise is that buying a home is a lot more expensive than it looks at first glance.

Many people think only of the down payment and the monthly premium they will be paying, but you also need to tack on additional costs like:

• Opening and closing costs
• Other fees
• Interest on your home loan
• Costs for repairs and renovations
• The price of furnishings and appliances
• Utilities costs
• Mortgage and homeowner’s insurance
• Property taxes