Despite the plethora of home loans in Victoria, the abundance of ‘risky’ mortgages poses a huge financial threat to many borrowers. Especially if it’s your first time to buy a property, you’re more or less susceptible to be lured by the advertised mortgages that almost seem too good to be true. The problem is, they’re true but not necessarily good.
As the demand for desirable houses for sale in Waurn Ponds, Vic, and other rising Geelong suburbs, increases, the stiffer the competition gets among lenders. Usually, that creates a level of playing field; however, many mortgage providers are more concerned about making more money than helping homeowners develop positive borrowing habits.
Mortgages with 95% LVR (or Higher)
Most lenders would let you borrow up to 95% of the property’s value. This means you’d only need to save a deposit worth 5% of the total purchase price to get a piece of real estate you want. At times, some lenders you’d even allow you to borrow more than 95%.
While this loan-to-value ratio may seem lenient, it doesn’t cause you to build plenty of equity in the property. If house pricing suddenly drops in your area, you might find yourself owing more money on your mortgage than the actual value of your property. A recipe for disaster indeed.
The only problem with an interest-only mortgage is it’s prone to misuse. This type of home loan is really designed to property investors that want to save on repayments in the short-term while gambling to gain more in the long-term through appreciation.
But when given to someone who has plans to live in the house for a long time, the savings that come with its lower repayments becomes just an illusion. This is because you wouldn’t make any progress in your mortgage despite not missing your repayments, as the principal would remain untouched until the interest-only period is over.
And by the time you’d start paying for your principal, the term is a lot shorter, and you’d have to deal with a significantly higher monthly repayment. It’s a death trap dressed as an oasis without a doubt.
Home Loans with No Genuine Savings
If you take advantage of a mortgage that requires no genuine savings, chances are, you don’t have legitimate savings to use as a deposit. The lack of such funds says a lot about your capacity to maintain repayments.
If you can’t save money in your bank account on a regular basis, you might have not adequate room in your budget to take a home loan.
Mortgages with lax requirements always come at a price. No matter how tempting they may be, it’s best to go with home loans with stricter policies for they’d help you become more responsible and capable.