The COVID-19 outbreak has caused a great deal of change and has forced us all to reevaluate many things.
One of the biggest changes to the community on the Northern Beaches as a whole is being unable to visit the beach, go to our favourite restaurants or hang out with our friends. This is frustrating but the silver lining is the opportunity it presents to save a bit of money and pay down some personal debts.
If you have been thinking of taking on your first home loan or refinancing and you still have secure employment, this quiet period is actually an excellent chance to be thoroughly prepared to submit an application.
So put down the Netflix remote and pull up some spreadsheets: it’s time to get your finances in shape.
Take a look at the following general advice about getting your finances in order.
Review your spending
One of the questions your lender will ask before approving a new home loan or extension to your current one is how much money you spend each month. Research shows most Australians don’t actually know the answer to this question.
Take the time to review the last couple of months in your bank statements and determine how much you spend on food, bills, education, transport, insurance and entertainment. Do some sums to tally up the amount and check that it is lower than your income.
It won’t hurt to create a budget and reduce unnecessary expenses so you can show the bank you earn more money than you spend each month.
Reduce your debts
With nowhere to go and little to spend money on, this is the perfect time to focus on paying off your debts.
Come up with a plan to pay off your credit cards and then reduce the spending limits as much as possible. Investigate your accounts to discover the lines of credit you may have forgotten about. For example, if you purchased a piece of furniture interest-free a couple of years ago, the unpaid balance will count as credit.
Any personal loans, overdraft or even Afterpay accounts can be considered as credit by the bank. Every $1000 you owe has the potential to reduce the amount you can borrow so do a search and discover mission then eliminate your debts as much as possible.
Gather some information
Before you apply for a loan, the bank will ask for documents including identification and pay slips. If you or your partner are from overseas, they will also want to confirm your residency status.
As you prepare for a home loan, your mortgage broker will help you figure out what documents you will need to provide in order for your request to be approved.
If you can approach lenders with evidence of very little personal debt, sensible monthly spending and the right documentation, your loan can be submitted and approved with fewer setbacks.
Buying during COVID-19
Times are certainly unusual but if you have steady employment in an industry which is not drastically impacted by the shutdowns, there may be a window of opportunity.
Right now, interest rates are even lower than they were a year ago, giving you the flexibility to either borrow more or enjoy the benefits of lower repayments. It has been many years since interest rates dropped below three per cent and many lenders now have this to offer.
Lenders are on the lookout for qualified buyers who meet criteria and present low risk. If that’s you, your mortgage broker should be able to come to you with some great options for home loans.
And right now is a good time to buy. Despite the current conditions, there are still properties being listed. The slowdown may result in less competition and finally allow you to get a foot on the property ladder.
If you’re interested in purchasing a home, at JDH Real Estate we can help put you in touch with reliable lending specialists who will review your specific circumstances and help guide you through the process. We are also happy to chat with you about your ideal property, your budget and the area you’re interested in. Contact us for more information today.
THINKING OF SELLING YOUR PROPERTY?
LIVE ON THE NORTHERN BEACHES?
Read our report on how to have a successful home sale, even within these unusual times of COVID-19.