Are you looking for your first home buyer loan?
The experience can be overwhelming for first timers! Having an expert mortgage broker to show you the ropes can make the entire process easier.
Find a Better Rate has brokers who will look into your financial situation and help you choose the right house loan. All you have to do is decide on a lender, and we will take care of the entire process.
Our brokers will take care of all the details, enabling you to make the right financial decision when you take out a mortgage.
Here's our ultimate first home buyer loan guide to help you get started.
What Type Of Home Loan Is Right For First Home Buyers?
First time home buyers have several loan types to choose from. Understanding the different types of loan available is crucial to choosing the right one that will work for you and your budget.
1. Variable Rate Loan
In this type of loan, the interest rate increases or decreases during the life of the mortgage. The rate can change at the discretion of the lender or when the Reserve Bank changes the official cash rate.
People looking for flexibility tend to opt for variable loans. With this type of loan, you must make minimum monthly payments on a regular basis, but you have the option to make additional repayments when it suits you.
There are no break fees for variable loans. However, there may be a discharge fee if you change loans or sell the mortgaged property.
These loans are not always suitable for people on a tight budget, as the minimum repayment can rise or fall at any time.
2. Fixed Rate Loan
Fixed rate home loans are very popular as they provide more certainty, allowing you to budget for the years ahead.
The rate is fixed at the start of the loan term and remains the same until it is fully paid. There is usually a break fee when if you switch to another loan before the term is ended.
Fixed rate loans can protect against the impact of rising interest rates, but remember that if interest rates go down, you will be tied into a higher rate.
3. Split Loan
When you want your loan to be part fixed, part variable, you can opt for a split loan. This loan offers the best features from each loan type, taking advantage of low interest rates while guarding yourself against the impact of rises.
4. Honeymoon Rate Loan
This loan offers lower interest rates for the first few years. After the honeymoon period, interest rates revert to the base rate.
For a first time home buyer, this type of loan is useful as you may have extra expenses during the initial years of home ownership, such as renovations or buying new furniture.
In addition to these types of loan, borrowers could also opt for a principal and interest loan or an interest-only loan.
First Home Buyer Loan: Repayments and Comparison Rates
When applying for your first home buyer loan, you need to consider:
- Monthly repayments
- Comparison rates
When looking at monthly repayments, don’t forget to consider the term of the loan, any ongoing fees, the loan amount and any other charges. You can use the repayment calculator to compute your repayment rate.
Another important consideration is the comparison rate. This factors in the loan amount, interest rate, ongoing fees, and repayment term to find the true cost of the loan.
These tools can give you a good idea of your costs, but for individual expert advice, you should consult a mortgage broker to find out about all your available options.
What Should First Home Buyers Look For?
First of all, you will need to check your eligibility for a loan. Then, look out for the best interest rates available to you.
It’s also important to look into the loan features. For example, the loan might offer a redraw option or an offset account.
In addition, you also need to look into the minimum deposit that you need to put down and whether you are required to take out Lender’s Mortgage Insurance (more about this insurance below).
How Much Should The First Home Buyer Deposit Be?
This is a common question for first time buyers, and there is no uniform answer. The deposit amount will depend on factors such as the purchase price and stamp duty costs.
Our mortgage brokers can assess your needs and provide a detailed assessment of your circumstances.
Our goal is to give you all the information you need in order to make the right decision. We can help you plan for your purchase and avoid any pitfalls.
Lenders Mortgage Insurance – What is it?
If you need to stretch your income to make the loan repayments, you may need to take out Lender’s Mortgage Insurance (LMI). Your loan amount and the loan to property value will serve as the basis for LMI calculations.
Lenders have to charge LMI when the loan to value (LVR) ratio exceeds 80 percent. The LMI charge is a one-time payment which can be consolidated into your loan amount.
Some lenders have different LVR requirements and will require a 20 percent deposit. Others are willing to finance as high as 95 percent loan.
If you would like to find out more about these requirements, get in touch with our mortgage specialists.
What Do I Need To Know About Australian Government Schemes Providing Grants To First Home Buyers?
If you’re in Victoria, you are exempted from stamp duties for properties with values not exceeding $600K. But if the value of your property is between $600K to $750K, you will have to pay for stamp duties at a concessionary rate. Properties higher than $750K is subjected to the full stamp duty. These regulations apply to contracts signed on or after 1 July 2017. Make sure you check out the full details on the State Revenue Office for Victoria website.
If you are eligible for the First Home Owners Grant, you could receive $20K for properties with values up to $750K.
If you’re buying a brand-new property, you may be eligible for a grant of up to $10K.
Meanwhile, in Melbourne, you could receive a grant of $10K to help you buy a home.
Basic eligibility requirements are as follows:
- You have not received the First Home Owners Grant before.
- You have never lived in a home you owned partially or wholly for six consecutive months on or after July 1, 2000.
Pensioners and people with a family may also be eligible for additional grants.
Our mortgage specialists have detailed knowledge of the various incentive schemes and they can help you find the most suitable grants for you. Once again, it is advisable to read a copy of the grant and lodgment guide from the official State Revenue Office website to get the full details.
How Can I Save Up A Deposit?
It can be hard to save for a deposit. Some options might include:
- Opt for a low deposit home loan
- Pay for LMI
- Ask your parents to be a guarantor
- Use the equity of an existing property
- Save money by cutting unnecessary expenses
Of course, there are still other choices. This is where our mortgage specialists come in. They know how the entire application and assessment process works, and they can help you find the loan that’s right for you.
How Can My Parents Help Me?
When you don’t have enough funds to cover the deposit, or if you have a low income, consider getting your parents help.
If you are calling on your parents for help, make sure everyone is aware of their obligations under any agreement.
If you are acting as guarantors, you will be liable for your children's loan repayments if they do not pay.
What Are The Costs Of Buying A Home?
Buying a home is expensive, and there are many costs on top of the property value. Other factors can push up costs, including:
- Legal and conveyancing fees - this can be around $880 to $2,200.
- Stamp duty - this depends on the state, but the higher the home value, the higher the price. First home buyers may also qualify for a stamp duty reduction. To get an estimate on what stamp duty will apply to your new purchase, you can use our free Stamp Duty Calculator. Always be sure to check for any other available exemptions.
- Building and Pest Inspections - Checking the new property is a must, especially if the property is old. Inspections can cost around $600 but will save you money in the long run by identifying problems and issues.
- Loan application fee. Some lenders apply a fee - fees typically cost around $600.
- Council and utility rates. After buying the property, you will need to make an extra payment to the seller for water or council rates. Most vendors will include these payments in the purchase price.
What Is A Pre-approval?
To see if your loan application will get approved, some lenders have a system called pre-approval. Pre-approval speeds up the loan application process.
Small defaults can affect a lender’s decision among other factors. Talk to our mortgage broker today and ask about your options.
Broker vs Banks
There are two options for first home buyers - bank or mortgage broker.
If you want to deal directly with your lender, you can get a home loan with them directly. Setting up repayments with your existing bank is easy.
If you are using a lender for the first time, it is a good idea to see what people are saying via customer reviews.
On the downside, proceeding directly with your bank means you might be missing out on other deals. If you have a bad credit history, your loan might not be approved.
When taking out a loan with a bank, always do some research. Ask for the best deals, and don’t be afraid to haggle.
Are you looking to compare different loan products? If yes, a good mortgage broker can be your strongest asset, particularly if you are a first-time buyer.
A broker will help you shop for the best loan and can also help find a good deal if you have issues with your credit history.
Low-income Earner Home Loan
Are you a low-income earner? You may still be able to obtain a home loan by using a guarantor.
Whether you’re a student, receiving government benefits or unable to take up full-time employment, you can still buy a home.
Each lender has their own criteria. Some will only need a guarantor for the down payment, while others need additional security for the entire loan.
It may be possible to borrow more than 100 percent against the loan, but this is rare.
For low-income earners, approval criteria are stricter due to the increased risk. Lenders review applications on a case by case basis.
Here are some tips to increases chances of approval:
- File a joint application. Combining two income sources can increase your options.
- Decrease the loan amount. Try to save as much as you can for a deposit and borrow the minimum amount.
- Pay off existing debts. Your total outstanding liabilities will influence the lender’s decision.
Are You A First Home Buyer With No Idea Where To Start?
Find a better rate can guide you through the process. Our mortgage brokers will provide:
- Resources: We offer expert advice, checklists, and calculators to help you stay informed
- Choices: Our brokers have a wide range of loan products to match you with. We will find the one that fits you best.
- Practical Advice: We use our experience to give you a realistic view of your situation and to find the best deal.
Investing in your first home is not an easy task. Allow our brokers to make the process easier for you and your family.
Some Of The Choices We Provide Include:
Fixed Rate for as Low as 3.99 percent, Comparison Rate at 5.13 percent
Investors and first home buyers can benefit from fixed rates. Benefits include:
- Terms of up to 10 years
- Loans with redraw facilities subject to terms and conditions
- Additional deposits of $30K without break fees
Low Rates of 4.37 percent, Comparison Rate at 4.43 percent
First home buyers are always looking for the most affordable deals. We can provide loans with these friendly terms:
- Owner-occupied and investors loan without monthly fees
- Interest Only option of up to 10 years for investors and five years for owner occupied properties
- Flexible options to make extra repayments
Full Feature Loans with Variable Rates of as low as 5.27 percent, Comparison Rate at 5.34 percent
- Offers discounted interest rates
- Ideal for owner-occupiers and owners seeking to refinance their home loans
- Offset transaction account
- Redraw facilities
Planning can go a long way – it can prevent you from making the wrong call. Here’s what your game plan should look like.
- Save Up. You need cash to make the downpayment for the house.
- Have a target. See how much you need to save before you buy a property.
- Know all the fees. Don’t be blindsided, look into all the possible expenses related to buying a home.
- Learn about grants. The government offers benefits to first home buyers. It’s worth checking out if you qualify for these schemes.
- Hire a legal eagle. Property purchases involve legal procedures. You need a professional to look over the purchase and make sure you’re getting a good deal.
Start Your First Home Buyer Loan Application
After planning, it’s time to start to get moving. Here’s a quick checklist of what you need to do in this phase.
- Find the right loan. As outlined above, there are all sorts of loans. Request an assessment with our broker to help you find one that works best for your financial situation.
- Get your paperwork in order. After narrowing down your choices, it’s time to submit applications. Be sure to gather all the required documents to expedite the process. You can lodge the application yourself or leave the process to your broker. It’s all up to you.
- Get pre-approved. As noted above, a pre-approval helps you plan your next move. Talk to our brokers to find out what to do next.
Meet with Us
Nothing beats having someone who is experienced and knowledgeable to discuss first home buyer loan applications with you. Our mortgage brokers will be more than happy to schedule a meeting with you.
Have Us Call You
Are you too busy for a face to face meetup? We’ve got you covered.
Leave us a message and our brokers will call you at a convenient time.
Don’t let your busy schedule prevent you from finding the best home loan options on the market. Allow our mortgage brokers to help you compare all loans and find the one that works for you.
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