Research the property before you choose a home loan. The numbers you find will shape your loan amount, your lender choice and how much room you have if rates move.
If you live in WA and you are weighing up a purchase, this article shows which parts of property research change your loan decision, and when to bring a broker in.
How Does Property Research Affect Your Home Loan?
Property research affects your home loan because the price, type and location of a property set your loan amount and your loan to value ratio (LVR). A higher LVR can mean Lenders Mortgage Insurance (LMI) and fewer lender options.
Lenders value the property before they approve the loan. If their valuation comes in lower than the price you agreed to pay, your LVR rises and you may need to find extra cash or renegotiate. Checking recent sales of similar properties before you make an offer lowers that risk.
The trade-off is time. Good research takes days or weeks, and in that time a property you like may sell. Setting your budget first lets you move quickly once you find the right one.
What Should You Research Before You Apply for a Home Loan?
Before you apply for a home loan, research recent comparable sales, the ongoing costs of the property and what your budget can handle if repayments rise. These three things tell you whether the purchase is realistic.
Comparable sales show whether the asking price is sensible. You can find them on property portals such as Domain and realestate.com.au, and your agent should also be able to supply them.
Ongoing costs matter just as much as the price. Council rates, water rates and insurance all sit on top of your loan repayments. Strata levies also apply if you are buying a unit or townhouse in a strata complex. Lenders count your living costs and commitments when they assess you, so a clear picture of these costs helps your application.
For repayments, use our mortgage repayment calculator to test different loan amounts. It gives you a working number before you ever walk into an open home.
Why Get Home Loan Pre-Approval Before You Shop?
Home loan pre-approval tells you how much a lender is likely to lend, so you can search within a realistic price range. It is not a final approval, and it usually depends on the property passing the lender's valuation.
Pre-approval is the link between research and action. Once you know your ceiling, you can filter listings and skip properties that sit outside it. Your borrowing capacity depends on your income, debts, living costs and deposit, and different lenders assess these in different ways. That is one reason a broker is useful at this stage.
The trade-off is that pre-approval does not last forever. Lenders set their own expiry periods, so ask how long yours runs. If you do not find a property in time, you may need to reassess.
Ready to get started?
Book a chat with a Finance & Mortgage Broker at Olsen Finance Group today.
How Research Changes the Loan You Choose
The property you are researching can change which loan structure suits you. An owner occupied home loan, an investment loan and a construction loan are assessed and priced differently, so your plan for the property comes first.
Consider a buyer who has found a block in Perth's outer suburbs and plans to build. Their research shows that a standard loan will not fit, because funds are released in stages as the build progresses. A broker moves them onto a construction loan, where the lender pays the builder at each stage and the buyer pays interest only on the amount drawn so far. The trade-off is more paperwork, plus regular progress checks from the lender. The outcome is that the buyer starts with a loan matched to the build, instead of finding out halfway through that the loan does not suit the project.
If you are buying your first place, the first home buyers page explains how the process works. If you are buying to invest, investment loans are assessed with rental income and different lending rules in mind.
Which Home Loan Features Are Worth Researching?
The home loan features worth researching are the ones you will use: an offset account, a choice of variable rate, fixed rate or split rate, and extra repayment options. Each one has a cost or limit attached.
An offset account sits against your loan balance, and the money in it reduces the interest you pay. The trade-off is that loans with an offset often carry a higher rate or annual fee than basic loans, so it only pays off if you keep a meaningful balance in the account.
A fixed rate gives certainty over repayments for a set period. The trade-off is limited extra repayments and possible break costs if you leave early. A variable rate moves with the market and usually allows extra repayments, but your repayments can rise. A split loan divides your balance between the two, which shares the risk.
Here is an illustrative example at 6.75% p.a., which is not a current market rate. On a $600,000 loan over 30 years with principal and interest, the repayment is about $3,891 a month. Change the loan amount or the rate and that number moves, so run your own figures through the calculator.
When Should You Speak to a Mortgage Broker?
Speak to a mortgage broker before you make an offer, or as soon as your research points to a price range. A broker can check your borrowing capacity and compare lenders while you still have time to adjust.
Brokers also review existing loans. If you already own and you are buying again, a loan health check shows whether your current loan suits your next move. If you are replacing a loan, refinancing is another option to look at.
If you are based in Perth, Mandurah or the surrounding areas, our team can work with you in person or over the phone. Brokers are paid in different ways, so ask us how we are paid and which lenders we compare. We will answer clearly.
Call one of our team or book an appointment at a time that works for you, and we will turn your property research into a home loan plan you can act on with confidence.
Frequently Asked Questions
Why should I research a property before applying for a home loan?
Your research sets the price range, loan amount and LVR you are working with. It also lowers the risk of a lender valuation coming in below your agreed price.
Is home loan pre-approval the same as final approval?
No. Pre-approval shows how much a lender is likely to lend, but it usually depends on the property passing the lender's valuation. It also expires after a set period, which varies by lender.
What costs should I research besides the purchase price?
Look at council rates, water rates and insurance. If you are buying in a strata complex, add strata levies. These sit on top of your loan repayments and affect how comfortably you can afford the property.
Is an offset account always worth having?
Not always. Loans with an offset can carry a higher rate or annual fee, so it tends to suit borrowers who keep a meaningful balance in the account.
