Monday, January 19

Purchasing A Home

Purchasing A Home or Buying a house is normally the largest and longest-term debt that the average Australian will incur in their lifetime. This alone can make buying a home a daunting undertaking, especially if you are a first-time homebuyer. It is very important that you understand some of the basics involved in taking out your first mortgage.

The term "mortgage" refers to the lien that is placed by the lender upon the house and property on which it sits. This lien gives the lender the right to seize the home away from you if you default on the payments. The lien is usually cancelled upon satisfactory payment of the loan. (Note: The word "mortgage" literally means "death pledge" from the original Latin. Obviously, taking out a mortgage is serious business!)

The need for home mortgages is readily apparent, as average house values have climbed to more than $500,000 in some Australian cities. Most of us do not have near that much cash on hand, and so we gladly place ourselves in debt for two to three decades in our quest to become property owners. This places a large part of the population deeply in debt, but it is considered a wise move for most people. Even though housing prices rise and fall in cycles, they have generally risen over time and this means that homeowners generate wealth as their property value increases.

Banks are the largest lenders of home mortgages, and they want to ensure that these large loans are successfully repaid. As the recent subprime mortgage situation has shown, banks get in trouble when large numbers of their mortgages end up in default. One way that banks protect themselves from losing money when someone defaults is by requiring the homebuyer to place a sizable down payment, such as 10% to 20% of the home value. This reduces the overall amount of risk the bank is taking on the loan. In addition, the homebuyer will be less likely to walk away from the mortgage if he or she has a sizable down payment invested in the property.

One important factor in a mortgage is the term of the loan. Since loans can last from 15 to 30 years, the bank has an opportunity to collect enormous amounts of interest from the homebuyer over that time. It pays therefore to shop around earnestly for the lowest interest rate possible, as even a small difference in interest rates can make a big difference in the total amount you pay over the term of the mortgage. Remember that interest rates are negotiable, especially if you get two or more banks competing to obtain your mortgage.

It also pays to have kept your credit record as clean as possible before you apply for a mortgage, and late payments on your bills and loans can place black marks on your credit report. Avoid ever paying a bill late again by using short term loan services such as an online payday loan company when you are short of cash to pay bills just before payday. Just head online to find a suitable provider and apply for a small, hassle-free easy loan so you have a cash loan to get you through whenever you may need it.
Author: Greer Lean
About the Author:
After helping Australians out with payday cash advances for over two years, Payday Online know what matters. We welcome everyday Australians to use our service at their convenience, for a quick, safe and hassle free cash injection in less than an hour. Check us out today at

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1 comment:

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