If you've ever bought a home before, you'll know how expensive it can become – particularly if you let your budget get out of control. When you're at an auction and your emotions get the better of you, you can bid more than you thought was reasonable, but you end up with the home of your dreams, right? True, but you could also be left with a lifetime of debt if you choose the wrong home loan provider.
Sydney is the second-most expensive city in the world, according to the 2017 Demographia Housing Affordability Survey. It comes in behind only Hong Kong as one of the two least affordable places to live in the whole world. Sydney ranks above places like Honolulu, San Francisco and even Los Angeles.
Buying a home is expensive enough – don't make it even more so by choosing an unaffordable home loan as well.
How much of a difference does your home loan make?
Depending on your interest rate, your home loan could make a huge difference to your total debt, your monthly repayments, not to mention your loan term. An introductory rate mortgage might seem good at first, not paying any interest for two years, for example, but after that period, your monthly repayments could increase a huge amount.
There are fixed rates and variable rates available as well. Fixed rates mean you pay the same amount for the duration of your mortgage, even if the cash rate drops. Variable rates mean your interest rate can change as the bank sees fit – great if the cash rate drops, bad if it rises.
You'll need to consider all your options before choosing the most appropriate mortgage.
Why is Australian property so expensive?
Just behind Sydney for affordability is Melbourne in sixth place – it's not just New South Wales that draws huge property prices.
Buying a home is expensive enough – don't make it even more expensive by choosing an unaffordable home loan.
"Sydney is after Hong Kong, which is sitting at 18 times household earnings, as the second-worst in the world, so it's just remarkable with so much land that Australia has got that it should have this problem," stated Hugh Pavletich, co-author of the Demographia report, as reported by The New Daily on January 24.
"There is not enough decentralisation in Australia. State and local governments have lost the control of their costs and their capacity to finance infrastructure properly."
Until the Australian property markets ease, and become more affordable for the everyday consumer, housing is going to be expensive. To make sure you can afford your mortgage, and that you're getting a great interest rate, make sure you chat with the team at CAPE today.