Home Loan Rates: One Cost of Homeownership Among Others
Financing a home is one homeownership cost. Insurance and taxes are others. The state of the home determines future costs, too. It determines how much upkeep to expect going forward. Home loan rates determine the total amount paid over the life of a mortgage. For financial literacy purposes, understanding the various homeownership costs is worthwhile.
What are Home Loan Rates?
Home loan rates, also known as interest rates, are the fee a homeowner pays to the lender for the funds lent. Most individuals do not have $400,000 set aside to purchase a new home, so they borrow the funds. The rates are a percentage based on the principal amount borrowed. Once the principal amount owed declines, the amount based on the rate declines, too.
The rate is determined by the market and an applicant’s financial status. Australia saw drop in rates, but it changes often. In January 2021, the average variable rate was 3.94% and 2.94% for fixed.
Any debt you take on includes an interest rate, which is a fee and cost. The amount owed rolled over to the next billing period incurs the interest rate charge. It is the fee charged for credit.
Home Loan Rates as a Homeownership Cost
Data released for February 2020 showed that the median home price in Australia was $550,000. This was a 6.1% increase from February 2019. The highest median home price was $873,000 in Sydney while the lowest was $387,000 in Darwin.
An applicant approved to borrow $550,000 takes the entire amount. At 4% over 30 years, the total amount paid is about $945,000. The home loan rate is a fee, so it is a homeownership cost. To see how a mortgage changes, check out one of our online calculators.
There are ways to lower the cost of a mortgage. Our team can outline them for you.
What are Other Homeownership Costs?
An individual’s financial situation differs from one to the next. Well-qualified individuals often receive a lower interest rate than others. For the first time owner, there are several government programs available. The goal is to help this group make the leap into homeownership, too. Financing is one cost of homeownership. There are others to keep in mind.
After the purchase, procuring insurance is the next step. In Australia, this means purchasing total replacement or sum insured cover. Additional home insurance policies to consider procuring include fire, accidental and storm damage. A lender may pose insurance mandates, so be sure to read the paperwork thoroughly.
Over the life of a 30-year mortgage, the home is going to require upkeep. Depending on the house’s state, it may need major renovations or simple maintenance. Homebuyers must set aside a cushion. In case the roof starts to leak or the walls need new insulation, the cushion comes in handy. Then, there are typical costs such as furnishings, utilities and taxes.