Are you looking to buy your first home or another residential property? Maybe you are looking to purchase for your retirement or even a beach and holiday house for the family. Whatever property you want to buy, you will probably be taking out a residential mortgage.
A residential mortgage is a loan whereby a lien is put on the property. A lien is a legal right placed upon the property that means the lenders have possession or own a property that may belong to another person until the mortgage or debt is paid off. The borrowers repay the loan – usually in monthly installments – over a specified period of time. Depending on the lender, there may also be the option to pay weekly or fortnightly. If the borrower can no longer make the payments, the bank or lender has the ability to foreclose the property and repossess it from the owner.
You will have an interest rate that is either fixed or variable and the interest will get paid off within the same monthly repayment. If you have a fixed interest rate it will generally be for a maximum of 5 years. However, a lot of mortgages have variable rates in the long run. Generally, loans must have a minimum of a 10-year loan term, but this differs between lenders.
You can think of the property you wish to buy as collateral for your loan and this makes you obligated, but also motivated, to pay the loan back. The benefit of residential mortgage loans is that you only are required to provide a deposit. Depending on which property you intend to buy, where you wish to buy it and how much you want to borrow, your deposit will be different. Some housing estates now only require a $2,000 deposit with the First Home Owner Grant but for most lenders you would require a minimum of 10% of the house value for a deposit.
When looking at a residential mortgage, you will have to consider all of the above: interest rates, whether they are fixed or variable, what the loan term is, how much money you have saved for a deposit, how much you are looking to borrow and what kind of repayment frequency you would like. The other option is taking the hassle out of hunting down the best mortgage for you by using a mortgage broker. Mortgage brokers are professionals who do all the hard work and will find the most suitable and beneficial mortgage loan for your circumstances.