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First Home Buyers

The ABC’s of Home Loans for First Home Buyers

First home buyers finance

Congratulations! You’ve taken a leap to own your first home. It’s a significant and exciting achievement for you. But it can also be a daunting journey. Its charting new waters and you’ll often face mind-boggling dilemmas. As first home buyers wading deeper into home ownership, you’ll need to make heads or tails of all the lending jargon, know which features you need to look out for in a home loan and make out how to raise sufficient deposit.

You need not be overly concerned about your biggest investment yet. We have broken down the topmost concerns about home loans for the first home buyer.

Make Sense of the Financial Jargon

Bankers and mortgage brokers will often leave you floating in conversations by the amount of jargon that they use. For the first home buyers, this can be daunting. Having an understanding of expressions like deposits, genuine savings, comparison rate, lenders mortgage insurance and acronyms like – Loan to Value Ratio (LVR) is excellent. It’ll keep you up to speed with the negotiations of your home loan.

But you need not burn the midnight oil to get this information. Our excellent team will walk you through every detail of a home loan to ensure you don’t drift away.

Also, you can have a look at our list of commonly used lending jargon and get a head start.

Work Out Your Borrowing Power

Here’s a quick run through to help you figure out how much you can borrow.

First, your gross income, financial obligations such as insurance payments and credit card commitments set-out the foundations of how much you can borrow. Your credit history is a crucial part of determining your borrowing power. After that, aspects of your lifestyle such as your family size and age come into play. If you are looking to take a construction loan as your first home buyer loan, the loan to value ratio will determine the maximum value which you can borrow. If all these variables aren’t making sense right now, you need not worry about how to come up with a figure. Our home loan calculator will give you accurate results which you can work.

What to Consider When Looking for Right loan for First Home Buyers

Now that you are familiar with the lending jargon and have an idea of how much you can borrow, it’s time to shift gears. Start devouring

information on different products available in the market for first home buyers.

But, that’s a tall order, especially when you consider the vast number of lenders and financial advisors available on the internet. Here’s where our first class service team can come in to give you details and help you narrow the search to products that best fit your circumstances.

But, which features on a home loan should first home buyers be looking out for?

home borrowing

Look out for competitive interest rates. The interest you pay directly affects your monthly instalment. High-interest rate means high monthly repayments and vice versa. First home buyers have the choice between a variable, fixed and, split – interest rate home loans. Variable rates change with the market rate while fixed rates remain unmoved by market fluctuations. A split rate is a combination of variable and fixed interest rate.

Look out for Flexible Loan Features that will bend and stretch with you as you grow over the years. Features such as an offset account, extra payments, repayment holidays and availability of a credit line can be the tipping touch on your loan decision.

Look out for a workable loan term. Home loans are often pegged at 25 years. However, most lenders can stretch up to 30 years. Keep in mind that the longer you take to repay a loan, the more interest you pay.

How Much Deposit Should You Raise?

A deposit is almost mandatory for all home loans. Your home ownership journey did not begin with the loan application. It started when you resolved to start saving for it.

Deposits for first home buyers range from as low as five percent to as high as 20 percent. The higher your deposit, the better it is for you as it can open doors to better negotiations with the lender.

However, keep in mind the lender will expect you to meet other costs such as stamp duty and lenders mortgage insurance.

If your dream of owning a home burns much more than you are willing to save up the deposit, you could opt for a no deposit home loan. You will need to secure a guarantor for such an application.

The Importance of a Mortgage Broker

For first home buyers, a mortgage broker is an essential partner. They are professionally trained to match your requirements with what is on the market. Mortgage brokers are conversant with market trends, products, have good relationships with lenders and will point you to reputable lenders.

But the best part is that you will not have to part with a coin for this wealth of information. Just get in touch with our panel of experts for expert advice on your first home loan.

The First Home Owner Grant (FHOG)

The First Home Owner Grant is an initiative of the government that seeks to spur Australian citizens into home ownership. The government extends a tax-free grant to first home buyers through a national scheme funded and administered by the different state or territorial governments. It can come in handy especially when meeting costs such as stamp duty.  You can learn more about the first home owners grant by visiting your local state department.

In conclusion, the steps you have taken as a first home buyer are commendable. But there is a long journey ahead. Contact our team to help you navigate through the unknown areas and get more information and guidance on these aspects and about your first home loan.