Purchasing a new property can be challenging even for seasoned home-owners – but for a first home-buyer, this process can be 100 times more daunting.
You're not only making one of the most important financial decisions you'll ever have to make, but you're also crunching numbers and trying to get your head around a host of new jargon and concepts. To help you find your way through this maze we’ve answered some of the most common questions asked by our first home buyers.
The knowledge contained in these answers covers the basics information that every first home buyer should know before they make such an important decision.
How much can I borrow?
Once you’ve made the decision to buy a home it’s tempting to start browsing realestate.com.au in search of your dream home. Our advice? STOP RIGHT THERE!
Don’t even think about looking at property websites until you’ve spoken to your lender and had a conversation about how much you are able to borrow. An even smarter idea is to get pre-approved for your home loan.
What is a pre-approval?
A pre-approval locks-in the amount that you can borrow, subject to certain conditions and for a set period of time (usually 3 months). Getting a pre-approval for your first home loan will mean that you will know exactly how much you can spend and will assist you in negotiating prices and making offers on a property.
What is a guarantor?
A guarantor is someone (usually a parent) who uses their property (or the equity in their property) as security, allowing a borrower to reduce the overall deposit required and avoid paying LMI.
What are the real costs?
Finding a property at the right price is important – but the real cost of buying a home is more than just the actual sale price of the property.
Depending on how much you’ve managed to save for your deposit, lenders mortgage insurance (LMI) could be one of your biggest purchasing costs.
What is lenders mortgage insurance?
Lenders mortgage insurance (LMI) is insurance that covers your financial institution if you default on your home loan. It also helps borrowers to get into the property market with a deposit of less than 20%. To give you an estimate of how much LMI is likely to cost you, we recommend speaking with your MOVE home loan specialist.
Other expenses to consider
- Home loan application fees
- Stamp Duty – work out how much your stamp duty will cost with our stamp duty calculator.
- Legal fees
- Mortgage registration fee
- Building and pest inspections
- Moving costs
- Insurance – this is a condition of loan settlement
- TIP: We don’t charge extra to pay fortnightly when you purchase your insurance through MOVE Click here to get a quote
What’s the difference in Home Loans?
While it sounds simple, finding a good rate is one of the many things to consider when choosing a home loan.
Be sure to check out and compare these features of each home loan you come across.
• Do they offer an offset facility?
• Do they allow you to make extra repayments?
• Do they allow you to make unlimited redraws?
• Do they charge any ongoing fees or early payout fees?
What is an offset?
A mortgage offset is a transactional or savings account which is linked to your home loan. The money that you put in this account will reduce the amount of interest payable on your mortgage. For example: If you have a $260,000 home loan with $10,000 in your offset account, you will only be charged interest against $250,000.
Tip: By building up your savings in your offset account, you can cut years and thousands of dollars off your home loan.
How does a lending specialist help?
Your home-loan is likely to be the greatest financial commitment you ever make. With a decision this important, you need someone in your corner you can turn to for advice and provide answers to the hundreds of questions that will be racing through your mind.
That’s why it’s important to get to know your lending specialist right at the beginning of your home-buying journey. A good lending specialist will become your home buying guru; they will ask you questions such as your income and living expenses to estimate the maximum dollar amount you can borrow. They will also be able to give you advice on everything from how to maximise your deposit savings to which loan type is right for your individual situation.
MOVE Bank’s lending specialists are committed to helping you every step of the way and are more than happy to touch base throughout the savings process. You can think of them as your home loan guru!
Or speak to a MOVE Bank lending specialist today on 1300 362 216
This blog post is for general information purposes only and is not intended as financial or professional advice. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product or other professional advice. You should seek your own independent financial, legal and taxation advice before making any decision about any action in relation to the material in this article. Railways Credit Union Limited trading as MOVE Bank ABN 91 087 651 090. AFSL/ Australian Credit License number 234 536 | ABN 91 087 651