Property Finance

We’re seen most financial institutions tighten up their lending criteria since the global financial crisis and considering what happened around the world on the money markets in the last 12 months it’s hardly surprising.

Recently, Westpac announced that first home buyers would need to meet a loan-to-valuation ratio of 87% instead of the previous 92%.

Prospective home buyers often get so excited about buying their own piece of paradise that they forget about evaluating the future. They base their home loan on their current financial circumstances and don’t take into account their future plans.

For example, the repayments may only be affordable if both partners work – they forget that they’re planning a family in a few years which will reduce them down to a single income and increase their weekly expenses.

Don’t go overboard with the current low interest rates. Whilst rates are at 49-year lows, remember that they won’t stay at these levels for the long term.

Borrowing to your maximum at this (or any) time is a recipe for disaster. Save a significant deposit – no less than 20% - and budget to make repayments at 2% above the current rates.

Better still, pay your mortgage at this higher rate from the start and build up a buffer that you can use if times get tough financially down the track.