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Planning to buy your first home? From choosing the property to getting the right finance, the list of chores is long. Don’t let the hard work overshadow the joy of owning your dream. Let us guide you for simplified financing.

Choosing the right property is important. Go for areas that have shown consistent capital growth in the past. Also, check for amenities such as markets, schools and public transport in the vicinity.

Frst home buyers

Look for features that are important to you – do you need an extra bathroom or an open kitchen?

Do you want to build your own home – in which case a house and land package may be best for you.

Budget it right. Before you decide to buy a property, ascertain what you can afford by using a borrowing calculator to check your borrowing capacity. You can also calculate your monthly repayments using our repayment calculator to plan your finances better.

Calculate your repayments at an interest rate that is 2-3% higher than the market rate to account for any future interest rate changes. Our borrowing capacity calculator already includes a higher rate that most lenders use to check how much you can borrow based on your existing income and expenses.

Financing the house. Getting the right loan means planning and researching well.

  • Compare deals online to get the possible rates. It is also a good idea to call and visit few lenders personally to get some extras.
  • Get a preapproval for your loan to know what exactly can you spend. This will avoid any disappointments in the future.
  • Using a mortgage broker can make the process smoother. Choose someone who understands your requirement and has experience and repute in the market.
  • Many kinds of loans are available in the market. Understand them better to choose right:

Principle and Interest Loans Principal refers to the actual amount you borrow. In this kind of a loan, your repayments are used to pay off the interest as well as a part of the principal to reduce the amount of loan gradually.

It is also possible to pay off the loan faster by increasing the frequency of payments or making additional repayments occasionally.

Interest Only Loans In an interest only loan, the repayments are only applied towards paying off the interest and not the principal. Thus, the actual amount you borrowed does not reduce but you have to pay smaller instalments than in a principal and interest loan.

Construction Loans If you choose to buy a vacant land and build your own home or plan to renovate extensively, taking a construction loan is a good idea. Construction loans allow you to drawdown money at different stages of construction and interest is only charged on the amount you have drawn down, saving you quite some money in interest payments!

Low doc loans Lenders often ask for proof of regular income before approving your loan. As a self-employed individual or an investor, you can opt for a low doc loan that requires minimum paperwork. The interest rate would be higher than the market and more deposit will be required.

Third party loans In case you are low on deposit, it is also possible to have a third party finance your property purchase.

Under vendor financing, a vendor will buy the house of your choice on his name and sell it to you at a higher price on instalments. You would be paying instalments to the vendor instead of a conventional bank, till you are eligible to apply for a standard home loan.

Another option is to rent the house from a vendor at a higher price and buy it later for a fixed price. Alternately, the vendor could finance your deposit to increase your chances of receiving a traditional home loan.

Should you fix your loan?

You can either take a loan at a variable rate of interest or fix the interest rate to take advantage of the low interest rates in the market.

By fixing, you can lock in a great rate (most lenders are currently offering a fixed rate of 4.57%) and enjoy easier financial planning. On the other hand, a variable loan lets you take advantage of the market rate and allows extra repayments at no cost.

Maybe, a good approach could be to partially fix your loan!

What about the Deposit?

Most lenders allow you to borrow up to 80% of the property value (80% LVR), which means you need minimum 20% deposit to get the loan. Further, another 5% would be required to cover stamp duty and other costs.

However, don’t let a smaller deposit hamper your property buying dreams. Our mortgage brokers can find you loans up to 95% of the property value at great rates.

The only downside of a high LVR loan is that you will be required to buy Lender’s Mortgage Insurance to protect the lender’s interest as high LVR loans are high-risk loans for the lenders.

Do I receive any state grants as a first home buyer?

FHOG is a national grant administered by each state. Many states also offer stamp duty concessions and other benefits, especially on new constructions. To be eligible, you must be over 18 years of age and a citizen or permanent resident of Australia. As a first home buyer, FHOG can be a significant boost to your finances. It can be used as deposit and most lenders are authorized to receive the grant on your behalf. Check your state’s website for more details or you can download the first home buyers grant and benefits sheet that we have prepared for each state to save you time and hassle.

 

A good loan should give you the maximum LVR, low interest rate and good customer service. Moreover, you may require additional features such as an offset account linked to your loan, the ability to make additional or extra repayments, redrawing any extra payments made by your or taking a repayment holiday (a period of up to 12 months where you don’t have to make any repayments). Mortgage brokers verified by HashChing can help you find the best home loan deals that fit your needs perfectly.

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HashChing is helping Australians by providing access to pre-negotiated home loan deals. Obligation free consultation with one of our partner brokers might save you time, hassle and money.

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