Things To Think About Before Getting A Home Loan

Up Up Up…Down?

House prices in many areas are rising fast. This is great for home owners as they become less risky (bigger equity in their home). However, this could quickly reverse as people, particularly property investors, start selling because they only make a gain if house prices increase. Consider this as a potential risk: if an investment property is in negative equity, there is no escape.

Affordability

Many people borrow sums of money assuming interest rates will stay the same and their jobs will continue to exist or pay more. You should be able to afford loan repayments if interest rates are 2% higher or, in the case of a double-income household, that one of the jobs is lost in a recession.

Interest Rates

Interest rates are at record lows and we expect them to remain low for the next few years. However, you are borrowing for up to 25 years. As such, interest rates will rise at some point.

Cash Out

Another reason to get a home loan is to borrow against a higher house price. This can be used to make other purchases or even start a business (and many people have successfully done this). Just make sure any new borrowings are affordable through the risks above.

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