If you want to buy a home, chances are you are going to need a home loan to help fund that purchase.

A home loan, or mortgage, is different to other debt because the loan is secured against the property. If you fail to meet your monthly repayments on the loan then the lender (usually a bank) can take the property from you and sell it to cover your debt.

There are two popular ways to set up your mortgage – principal and interest or interest only. A principal and interest loan requires you to pay back the amount you borrowed plus the interest gradually over the life of the loan. This type of mortgage is the most common and usually lasts twenty – thirty years. An interest only loan requires you only to pay the interest back monthly and then pay the principal back at the end of the loan period.

So what do you need to get a mortgage?


Typically, you’ll need three things to get a mortgage.

1. Deposit, typically twenty percent

 Most lenders will not let you take out a mortgage for the full cost of the property. Borrowers must have saved up a deposit prior to applying for the loan, typically twenty percent. There are some lenders who will let you borrow with as little at 5% deposit but this carries another level of risk and often there are a lot of additional fees and costs like lenders mortgage insurance (LMI).

2. Regular income

 Most lenders want to see that you’ll be able to afford to repay the loan. It’s common for lenders to ask to see your payslips to understand how much you earn and also, your liabilities and expenses to ensure that you can make your repayments.

3. Good credit history

Lenders will check your credit rating to make sure that you’ve paid back any previous debt you’ve had. This will show whether you’ve been late on a credit card payment or failed to pay off a previous loan or bill you’ve had.

Do I need a home to get a home loan?


Oddly enough, no. Most lenders will give you pre-approval, which is an indication of how much they’re happy to lend you. The pre-approval usually comes with some terms and conditions attached so make sure you fully understand them before you start your house hunt.  

How do I chose a mortgage lender?


Mortgages are complex financial transactions so if you’re unsure, it’s always best to consult an expert. In this case, a good mortgage broker will be able to explain to you how to get the best deal and explain in plain English the terms and conditions attached to it. They can also help you decide how much you should borrow (rather than what you can borrow).

When choosing a mortgage broker, it’s important to confirm that they are authorised. Accredited mortgage brokers have licenses and you should ask your broker to provide details of their authorisation or a copy of their license.


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