4 tips for choosing the right mortgage for your financial future

4 tips for choosing the right mortgage for your financial future


This article was made possible thanks to Westpac, Australia’s first bank with a range of innovative financial packages to support your personal, business or corporate banking needs.

Learn more at

Mortgage rates saw a major hike recently, touching almost 7 per cent. This led to several changes in the market as well as the buyer’s mindset.

Approximately 34 per cent of people halted their home shopping process, while 42 per cent said they will stop applying for mortgages if the rate increases any further.

And as of yet, we do not see the mortgage rate falling back to an affordable range. It will either continue to hike or stay the same until the economy regains health.

Does this mean there’s no hope for first-time home buyers like you? Should you take the risk and try alternative financing? Not necessarily.

It is still possible to secure a mortgage that fits your financial situation with strategic decision-making and careful planning. In this post, we’ll share four effective tips to help you navigate the mortgage market wisely.

Let’s get started!

1. Calculate your debt-to-income ratio

The debt-to-income (DTI) ratio is a measure that compares the amount of debt you have to your income. It helps lenders assess your ability to manage additional debt, such as a mortgage.

You can calculate it using the following formula:

DTI Ratio = (Total Monthly Debt Payments / Gross Monthly Income) x 100

For example, if your monthly debt payments (including credit cards, loans, and other obligations) add up to $1500 and your gross monthly income is $5000, your DTI ratio would be 30 per cent.

Now, there’s a standard for assessing the DTI ratio and here’s how it goes:

  • Below 36 per cent: Lenders generally prefer a DTI ratio below 36 per cent. This indicates that a manageable portion of your income goes towards debt payments, leaving room for an additional mortgage payment.
  • 36 per cent to 43 per cent: A DTI ratio in this range may still be acceptable to some lenders, but it may affect the mortgage options and terms available to you.
  • Above 43 per cent: A DTI ratio above 43 per cent may raise concerns for lenders as it suggests a high level of financial strain. It may be more challenging to secure a mortgage or obtain favorable terms at this level.

Calculating your DTI ratio can help you determine your eligibility for different mortgage plans and give you a clear insight into the monthly payments you can afford.

Your choice of mortgage plan will not be based on guesswork or rough estimates — meaning you can be clear about how much you will earn, spend, and save each month in the entire mortgage repayment duration.

2. Settle for a repayment length that aligns with your financial goals

Once you’ve determined your budget with the help of DTI, think about your short and long-term financial goals.

Ask yourself the following questions:

  • Do you want to own a house as early as possible or can it wait?
  • Is owning a house your top priority or would you rather spend on other experiences (like family vacations) over the years?
  • Will your income increase over time?
  • What other major expenses do you have to cater to other than house ownership?
  • What are your plans for retirement?

Based on your answers to these questions, settle for a repayment duration that aligns with your goals. Here are your options:

  • Short-term repayment duration: Options are available as 5 years, 7 years, 10 years and 15 years.
  • Long-term repayment duration: Options are available as 20 years, 25 years, 30 years, 35 years and 40 years.

Note that both short-term and long-term repayment plans have their pros and cons.

Generally, you’re likely to pay high monthly installments in a short-term repayment plan. But this also means you will become loan free within 5 – 15 years. This suits people with high income and families with multiple earning members.

Long-term repayment plans mean you can pay a small amount every month, but you’ll remain in mortgage chains for 20 – 40 years. This arrangement usually suits people with low-average incomes and those who are the sole breadwinners of the family.

If you’re curious about the exact interest you’ll have to pay on various repayment lengths, you can use the mortgage repayment calculator.

3. Compare mortgage types

Next, compare the different mortgage types and determine which one suits you best. We’ve done a quick comparison for you:

Mortgage types

If you’re unable to pick the best solution for your needs, we recommend consulting a mortgage professional.

4. Evaluate the lender’s reputation

Lastly, always consider the reputation of the lender. Here’s how to do it:

  • Begin by looking at online reviews and ratings to gauge customer experience
  • Seek reviews and recommendations from friends or family who have recently obtained mortgages
  • Check for industry affiliations and accreditations that demonstrate ethical practices
  • Assess the lender’s customer service and responsiveness during your interactions
  • Consider the lender’s experience, stability, and financial strength
  • Review loan terms, fees, and transparency.

This is the most important step to choosing the right mortgage. Just think about it. If you get stuck with a bad lender in a 30-year plan (especially with an ARM mortgage type), you’ll have a tough time.


This article was made possible thanks to Westpac, Australia’s first bank with a range of innovative financial packages to support your personal, business or corporate banking needs.

Learn more at