Practise makes perfect before committing to a loan

Buyers are being warned not to succumb to temptation and borrow beyond their means.

As record-low interest rates in Australia attract first-time buyers to the property market at their highest level in years, the Federal Government is relaxing the responsible lending laws in place since the global financial crisis of 2008.

The free flow of credit may seem an ideal scenario for those prospective buyers with a fear of missing out on stepping onto the property ladder.

But in reality, it’s important they are wary of overextending themselves financially because the responsibility is effectively shifting from lenders to borrowers.

Learn from history

Founder of independent financial comparison site CreditWorld.com.au Roland Bleyer said the GFC occurred when US lenders provided credit to borrowers even when they couldn’t pay it back.

But in a bid to avoid history repeating, Mr Bleyer wants would-be buyers to establish good habits before committing to a loan – in the interests of self-protection.

Remember that buying property is probably the single biggest purchase you will make, so it pays to be properly informed.

Plan ahead

The first piece of homework is to examine your finances in fine detail over an extended period, say at least a month or two, to provide insights about your incomings and outgoings.

After establishing your earning capacity, spending and debt levels, lenders usually then determine your ability to take on more debt and how much you can safely afford for repayments, including any potential rate rises.

The good news is that loan calculators can play a similar role.

Compare the loan repayments

Next, go online and examine each loan’s advertised rate and, using personal loan calculators for an estimate, compare loan costs over varying terms — such as 20, 25 and 30 years — to suit your personal circumstances.

Once you have determined a figure that will not be restrictive, try to mimic repaying a mortgage by direct debiting funds into an account you cannot touch. This will determine the limits of what is possible when a loan is finally approved.

If in practise mode, you cannot comfortably live on the remaining funds without compromising on lifestyle, it tellingly pre-empts the struggles ahead should you sign upon the dotted line.  

Knowing what works for you is just as important as any loan arrangement or interest rate. So, it’s vital to be informed before you’re locked into unrealistic self-expectations and potentially crippling overheads.

chrisbrown1224

Managing Director – New Vision Financial Services & New Vision Real Estate After years in the banking, finance & commercial sector Chris noticed that the industry needed a company with a personal touch that offered their customers a complete solution. In 2015 New Vision Financial Services was created to allow our consultants to use their experience (including approving and structuring large complex commercial transactions through to basic home loans) and to concentrate on offering a personalised service to their clients. With the growth and success of New Vision Financial Services a decision was made in 2019 to launch New Vision Real Estate to provide an end to end solution for client weather they be first home buyers or seasoned investors. Chris has built a team at New Vision Financial Services and New Vision Real Estate that have access to over 70 different lenders, insurers, lawyers, accountants and financial planners giving you more flexibility when making a decision. We offer a full service Real Estate agency offering Sales, Leasing, New Developments, House & Land and Commercial. Call me anytime on 0433 181 544 or email chris@newvisionfinancial.com.au The team at New Vision Financial Services have access to over 70 different lenders, giving you more flexibility when making a decision. Our consultants have had extensive experience within the banking, financial and corporate sector. At New Vision Financial Services we specialise in finance lending for home, investment, business, commercial, asset, debtor and many other requirements. As New Vision Financial Services has progressed, we have developed strong relationships with professional service providers such as; Financial Planners, Accountants, Settlement Agents, Leasing & Equipment Providers, Debt Management Specialists and any more to allow our clients access to a complete suite of services.