How to Finance Your New Home

Unfortunately, asking your parents how they obtained your family home isn’t going to help you much. The answer would merely be that they opted for a bank loan, and that was it. However, for better or worse, nowadays there are a lot more answers to this question, and important steps to follow. Let us show what needs to be given the priority, and what your options are today.

Get a pre-approval

Home loan pre-approval is a kind of evidence showing the lender your financial ability to purchase a new home. Actually, for example in Australia, a home-loan pre-approval is a good way to start searching for the property to buy. It may sound odd, but there are several good reasons for it. Firstly, it gives you an advantage over the other potential buyers and makes you stand out from the competition. Secondly, it gives you a clearer picture on how much you can actually borrow. Of course, you start with a certain price range in mind (hence no need for a specific property just yet). Bear in mind it can take up to 90 days for you to obtain this document before you can use it as an asset.

Builder financing

In case you can’t find anything on the market that appeals to you and you decide to build your own house, there’s always the option of the so-called builder financing. There are two ways to this: either you are borrowing money from the building company, or they promise special perks and benefits if you choose one of their preferred lenders. Either way, a thorough research is a must. Assistance with closing costs is usually what sounds most attractive with such offers, but make sure you explore other options and make the comparison. Sometimes a good interest rate compensates greatly for the suggested perks.

Fixed-rate loan

Interestingly, some loans are about your personality as much as they are about the finances. If you’re the type of person who sees himself/herself living in this new home for a few decades, this is the loan for you. The interest rate doesn’t vary, no matter what the state in the economy is. Usually, this goes on for 15 to 30 years. If you’re unsure whether you’ll be staying in one place for so long, check the following solution.

Adjustable rate loan

If you’re the kind of person whose credit score isn’t something you could boast about, this would be your perfect loan. This loan is giving you a nudge – for the first five or ten years your interest rate will be lower than the average, which should buy  you enough time to pull yourself together and get ready for surprises, because that’s exactly what you can expect after the mentioned period. When interest rates rise/decrease, so will your monthly payment.

Bridge financing

This is what seems very tempting if you already have a home, and you’ve found a new one which seems absolutely perfect. However, you haven’t sold the old one yet, and even when that happens, you will still be short of some cash. These loans are usually approved by banks, but you should beware the interest rates. You’ll get the money on time to buy the new house before the old one is sold, but the rates will be higher than the average.

Government Incentives

When you think you’re still a bit short when it comes to housing funds, perhaps you’ve forgotten to check what the government’s website has to offer. For instance, Canadian government is offering 10% mortgage loan insurance premium refund and an extended amortization period if you opt for buying an energy-efficient home. Being environmentally friendly will literally pay off. Similarly, the government of Australia has some excellent ways of encouragement. You could save thousands of dollars depending on whether it is your first home, a second property, or you’ve decided to settle down in a certain region.

As you can see, it’s not that hard to choose the right financial source. Define the price range and apply for the pre-approval. In the meantime, think about whether you see yourself in the new residence for a couple of years, or “forever”. Last but not least, browse the government website for some excellent news, and you can start bidding for your new home.

Sofia is a passionate writer from Sydney. She also enjoys decorating houses and engaging in home renovation projects. That is why she loves sharing her experience and advice with other people through her writing. Besides this, she loves technology and gadgets which can help us get through a busy workday.

ganesh

Hello Everyone this is Ganesh, a passionate finance blogger and experienced business and finance expert. From last 5 years I have been attending various projects, conferences and also worked on top financial sectors. I have gained knowledge on these sectors and will be sharing all my experiences in this blog. Please keep visiting my blog for more updates. Thank You

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