Getting into the property market needn’t be a nightmare if you set some basic limits.

A house is the most expensive item you will buy in your lifetime, so it follows that a loan for a house is the biggest one you are also likely to take out. Buying a home coupled with the right sort of borrowing is generally a sure way to create wealth if you follow some simple principles.

The best place to borrow and the type of loan to get depends on your deposit, your savings record, your income and any other loan commitments you might have. 

It is also important to consider the legal and borrowing costs involved in financing a home. These may include mortgage stamp duty, valuation fees, loan application fees, fees for the lender’s solicitor, mortgage insurance and registration fees. These can vary greatly between lenders but any lender you are considering using should advise you of all the initial borrowing costs. It is important to watch loan charges carefully because if the loan is only for a short term, it is often better to take a higher interest rate and save on the initial charges. 

Take your future into your own hands and do a budget before you think about borrowing (we can supply you with a proforma budget to use). After you have done your budget and taken into account items such as replacing a car, holidays and home maintenance, you will know how much you can repay weekly on a new loan. If you are buying an investment property, don’t overlook the net income from that property. 

Then it is a matter of asking the lending officer how much of a loan your nominated weekly repayments will get you. Once you know this figure, you can plan your borrowings with confidence knowing that the payments fit your lifestyle. 

When buying a property you can often negotiate a lower purchase price if you can sign an unconditional contract because the seller does not have the fear that the sale may fall through if finance is not approved. By going to your lender before you start looking, you can usually obtain finance approval in principle.

One of the secrets of becoming wealthy is to minimise non-deductible debt (such as your housing loan) while maximising debt for property and shares where the interest is tax deductible. Therefore, you should aim for the highest deposit possible, as this will allow you to pay off the loan faster and save a large amount of money in interest. 

Most lenders now have two different interest rates – one variable and one fixed. Which do you choose? That is a difficult question because if rates are in a downward trend you will do better with a variable rate and if rates are moving upward the fixed one is preferable. Nobody knows which way interest rates will move, so you will have to choose the one with which you feel most comfortable.