FAQ For First Home Buyers
Buying your first home is an exciting experience however it can be stressful. Planning is the key, you will need to budget so you can save a deposit and establish a savings history, most lenders want to see 6 months savings so get started as soon as you can, as a general rule you will need at least a 5% deposit. There will be other costs associated with borrowing including:- legal fees, inspections, valuations and stamp duty in addition if you have less than a 20% deposit you will have to pay Mortgage Insurance.
The First Home Owner Grant is a one-off state government grant of $7,000 available to first home buyers who intend to live in the home they’re purchasing. You usually receive the amount upon settlement of your home loan. But certain conditions may make you ineligible for the grant. You need to check out the government requirements for you to be eligible. Check the Links Page to see each Territory and State requirement for FHOG.
When buying a house you can takes months to find the perfect home, after you have found the perfect home the last thing you want to do is spend time becoming experts on lenders requirements and products. Let us research the hundreds of products available and recommend those that would best suit your needs. Here are a few things you should consider.
- How much do I still need to save?
- Do I qualify for the government’s First Home Owner grant?
- How much can I borrow?
- For what purpose am I buying the property?
- Which type of loan is right for me?
- Will I need to be able to suspend payments? Ie if one income earner is planning to stay home with a new baby
- Do I need added features in my loan, like redraw?
- Do I need a pre-approval because I want to go to an auction?
- Do I know what documentation I need in order to apply?
Should I have a fixed or variable rate?
There are advantages and disadvantages to both. A fixed rate means that even if the Reserve Bank lifts interest rates, your repayments will remain the same for the fixed period of the loan. The opposite is also true, though, that if the Reserve Bank lowers interest rates, your repayments will not decrease. Fixed rates are often helpful for budgeting, as you know what you will have to pay. The disadvantages are that fixed rates often limit or even prohibit additional repayments. The advantage of variable rates is that you can make additional repayments as you wish to pay your loan off sooner.
Should I go for the discount variable rate for the first year?
Usually taking out a discount variable rate for the first year does not work out the best in the longer term. Often they mean higher interest rates when the discount period is over, and often involve extra charges if you try and change the loan later on.
What is a Redraw Facility?
If you have been making extra repayments above the minimum, a redraw facility would allow you to draw on that extra money if you wished, for a holiday or to buy a car for example. This can be a good way of saving, because the extra money that is paid into the home loan is reducing the interest you will have to pay for as long as you leave it in the loan.
Why should I want a Portable loan?
This allows you to take your loan with you when you sell your property. This means you don’t have to pay new establishment fees and other costs when you buy your new property. This should be considered when you do not intend to stay in your new home for good.
Can I get a loan if I have bad credit?
Investors Choice Mortgages will do their best to get you a loan irrespective of your credit history. It is important that you notify us of any past credit problems, however, as they will be revealed as the loan process occurs. Also, we have access to ‘second-chance loans’, for people who have had problems in the past.
What to expect
The extra costs
There can be extra costs when buying a home these include: stamp duty, legal costs, disbursements, mortgage insurance, pest inspection report, survey report, builder’s report, strata inspection report, loan application fee, valuation fee, registration fee, sundry fees like refinancing or switching fees.
Understanding the housing market
We have come through a period of growth in the housing market, the cyclic nature of the property market essentially means what goes up will one day come down – or stay the same. It is good planning to budget on a 1,2 or 3% increase in interest rates and see how much capacity you have to make repayments, you can create a buffer somewhat by making sure you have a decent size deposit, this helps lower the size of your repayments. Property is a long term investment and for those who see it as a short term investment can increase their risk. When you can you can make extra repayments further reducing the amount you need to pay
Check your statements for errors
There are claims that more than 50 percent of home loan statements contain calculation errors. Simple mistakes, like the entry of the incorrect balance or the application of the wrong interest rate at the wrong time can be costly and mostly favour the lender. We all make mistakes, even bank computers make them and that’s why borrowers should keep a close eye on loan statements. Various software for your home PC is available that can run a check on your statements.
Compare loan features, not just rates
The more flexible the loan, the higher interest you’ll pay. A variable loan which allows you to draw against repayments or offset savings against the mortgage will have a higher rate than a basic loan. Always compare loans with the same features when looking for the best interest rate.
Ensure your mortgage broker really delivers
Getting a broker to arrange your loan can certainly save a lot of time and hassle, but borrowers really must ensure the service they expect is the one that’s delivered. Ensure the broker fully explains why his or her loan recommendation is the best for your circumstances, not just the loan that earns the most for the broker. Ensure brokers also fully outline all upfront and ongoing “trail” commissions they will earn from lenders for your loan business. At Investors Choice Mortgages you pay nothing and all monies earned by your broker will be declared to you.
Pay your loan off quicker with fortnightly or weekly repayments
Dividing your minimum monthly repayment into two fortnightly or four weekly payments can reduce the term of your loan in two ways: because there are more than two fortnights or four weeks in every month, dividing your original monthly repayment into two or four means you actually pay more over the course of a calendar month.
When interest is calculated daily, the more frequent repayments result in less interest being charged to your loan over the course of a month.
But watch out. If requesting fortnightly or weekly repayments, make sure you specifically ask your lender to halve or quarter the monthly repayment. Unless you ask them, many lenders these days will just calculate the more frequent repayment on the basis of the minimum required fortnightly or weekly repayment, delivering very little extra repayment advantage.