When it comes to a mortgage, simple is best, so beware expensive bells and whistles.

Locating that first property to call your own - combing the classifieds, trawling through open houses, sorting dumps from dream homes - can be an exhausting process.

And, even when you're the successful bidder, it ain't over yet.

"Searching for that first home can be all-consuming but, once you've found it, the goal changes immediately to finding the right loan and paying it off," says Lisa Montgomery, the national manager of marketing and consumer advocacy with resi Mortgage Corporation.

Many first-home buyers look to mortgage brokers to guide them through what can be a bewildering range of options but it's important to do your own legwork.

"Look around for the best deals and investigate at least two to three lenders," says Harry Senlitonga, a financial analyst with Cannex.

Considering the features of the loan you will need, as well as those you don't, is also important, he adds. If your budget is already cut close to the bone, it's probably not worth signing up for a product that allows you to make extra repayments, or redraws, as you won't make use of those expensive bells and whistles. Basic loans have rates as low as 6.2 per cent.

"Similarly, you need to think long term for your loan, because some mortgages have restrictions that won't suit you down the track," Senlitonga says.

In some cases, a loan will choose you, rather than the other way around.

If you haven't cobbled together sufficient cash for a deposit, your only alternative might be a 100-per-cent-plus loan which, as the name suggests, allows you to borrow up to the full value of the property and sometimes even more.

For example, lenders such as Peach Home Loans and First Permanent allow you to borrow up to 106 per cent of the property's value.

However, the general manager of research firm InfoChoice, Denis Orrock, regards this as a risky strategy: "With 100-per-cent-plus loans, there is no creation of equity for about the first five years of the loan and this can leave people badly exposed during a downturn."

Introductory rate loans, with a lower interest rate for a limited period, usually six to 12 months, are another option.

A wide range of institutions woo customers with a "honeymoon" period, including the ANZ Bank (with its Easy Start loan) and BankWest (with its Mortgage Shredder) but be prepared for higher repayments to kick in when the introductory period ends.

YOU'D BETTER SHOP AROUND

Picking the most suitable loan was as important as snagging the right property for one young Melbourne couple.

Glenn Thompson, 30, an office manager in a stockbroking firm, and Kara Beckhauser, 25, an IT worker, found shopping for finance a more manageable task than finding a property - but just as crucial.

"A few weeks before we purchased, we sought pre-approval of finance," Thompson says. "Being confident about how much we could borrow and bid on a property definitely eliminated a lot of stress."

Research on financial mortgage trends from insurer Genworth Financial shows the big four banks dominate the Australian mortgage market, holding 76 per cent of total mortgage lending. Thompson and Beckhauser reviewed the major banks' deals but opted to go with one of the smaller lenders, resi Mortgage Corporation.

"... We felt no obligation to sign with [banks because] resi has various products that are appealing to first-home buyers," Thompson says. "They also responded quickly to phone calls and emails, which we valued highly, and were willing to step us through the process with no pressure."

Keen to "future-proof" their purchase, the couple bought a house big enough to accommodate them for at least 10 years.

This meant a sizeable mortgage with a 7.19 annual rate - "I'd rather not specify a figure," Thompson says - so for the 18 months before buying their Melbourne home, they were single-minded about clearing car and credit card debts.

"We wanted to be in a position where the only debt we had was the mortgage," Thompson says. "That's how we were comfortable. It was important we have a solid platform."

Clearing old debts and sidestepping new ones are sound practice, according to resi's Lisa Montgomery, who says first-home buyers flushed with pride are often sorely tempted to fill their castle with consumer accoutrements.

"It's easy to feel so confident that you go out and get other debt to buy the new plasma screen, stereo and furniture, and usually it's done on a 12- to 24-month interest-free deal," she says.

"People think they'll pay it off within the interest-free period but most don't and all it does is create more pressure on the household budget."

Having rented previously, Thompson and Beckhauser already had their furniture and whitegoods together, so their financial focus is now on whipping the outstanding mortgage balance into shape.

"We intend to pay off more, and more often, than we have to."

Source: moneymanager