Buying your first home

1. Know how much you can borrow
Once you’ve made the decision to buy a home it’s tempting to start browsing property websites like 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. A pre-approval locks-in the amount you can borrow, subject to certain conditions and for a set period of time (usually three months).

Getting pre-approved for your loan allows you to know in advance how much you can afford to spend on your home. That means when you start looking for a home you’ll be shopping in the right market – and makes it less likely you’ll fall in love with a property that’s way out of your price range.

It also means that when you do find the right property you can confidently make an offer, knowing that your finance is sorted. This gives you a distinct advantage over other buyers who haven’t been approved for a loan.

2. Know 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.

You may have heard that you should aim to have a 20% deposit before you buy. This is because if you borrow more than 80% of the purchase price you’ll have to pay LMI, which covers your financial institution if you default on your home loan.

While having less than a 20% deposit may allow you to buy your first home sooner it can also add several thousand dollars to your loan. If this applies to you make sure you ask your lender to give you an estimate of what the LMI is likely to be so you can take it into consideration

Other purchasing expenses you’ll need to take into account include…

• 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. Did you know that you can pay your insurance fortnightly at no extra cost when you purchase your insurance through MOVE Bank? Click here to get a quote

3. Know how to manage your finances
While it sounds simple, creating a budget is one thing which is seriously underrated. To begin your budget plan it is important to know exactly how much money you have coming IN, versus how much you have going OUT in the form of financial commitments, major bills and living expenses.

Living Expenses

One thing which can be easily forgotten when creating a budget is to factor in your living expenses- and it pays to be realistic! If you know that you like to head to the movies every Tuesday or out to brunch on a Sunday, make sure you factor this in. There is no point creating a super strict budget which isn’t realistic as there is more of a chance you will ditch the budget and dip into your deposit savings.

Property Expenses

When working out your budget it is essential to factor in the new costs of being a homeowner. As a first home-buyer rates bills and even water bills might seem completely foreign to you.

Rates are one of those bills which will appear in the mail on a quarterly basis and are calculated for each property based on land valuations and rating categories. Other levies and waste management charges will also be included. When looking at the 2015/2016 Brisbane City Council statistics, average rates bill in the Brisbane area can cost anywhere between $700 and $2600 depending on the suburb in which you live 1. In addition to your rates, it’s likely you’ll also need to spend some money each year on routine maintenance to your property so make sure you include this in your calculations.

Home Loan Repayments

When working out how much you should start saving it is important to factor in what your future mortgage repayments might look like. You can use the MOVE Banks home loan repayment calculator to work out how much you should start putting away every fortnight, and if you can afford any extra it is a good idea to put this in too! Having these funds in a high-interest saver will mean you can start earning extra dollars off your deposit nest egg and will help you reach your deposit goals a little bit quicker. When it comes time to buy, showing a mortgage lender a solid savings history will really boost the strength of your home loan application.

4. Know your lending specialist
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. The right lending specialist will 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 Banks 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!

The majority of home loans fall into one of three categories: fixed rate loans, variable loans and split loans. Each type of loan can provide you with specific benefits – but how do you know which one is right for you? To help you decide, we’ve broken each loan type down into its pros and cons so you can get a better idea of which option might suit you best. We’ve done the hard work for you!

So if you’re in the dark about which option is best for you, look no further- we’ve got you covered!

Fixed
A fixed rate home loan means that you lock in an interest rate for a set period of time (usually 1, 2, 3 or 5 years). At the end of the fixed rate term, the loan will usually change to the standard variable rate offered by the lender.

While fixed-rate home loans ensure that fluctuating interest rate rises do not affect you, this also means that rate drops won’t apply to you. Fixed rate home loans can also restrict features such as redraw facilities, extra repayments and break fees often apply.

Best for: Fixed rate loans are great for people that want the security of knowing their repayments aren’t going to change. So if you’re on a tight budget a fixed rate loan can really help with managing your cash flow.

Variable
If you decide not to fix your home loan, your interest rate will move with the changes in market interest rates. This means that your interest rate could rise and fall over the life of your loan, which may affect your repayments. Variable rate home loans are generally more flexible with your repayments, redraw facilities and offset options.

Best for: Variable rate loans are great for people that want the flexibility of paying extra repayments into their home loan. So if you’re looking to pay off your home loan as quickly as possible, a variable rate home loan will offer you the flexibility you need, with all the added benefits of an offset and redraw facilities.

A variable rate option is also great for people who are planning on ‘flipping’ their property- in other words, people who buy property to sell it shortly after, because there are no exit or break fees.

Split
You can also take advantage of fixed and variable options by splitting your loan, meaning that one part is fixed and the other part is variable. This can offer you the best of worlds, security from interest rate rises and the benefits of interest rate drops.

Best for: Splitting your home loan into both fixed and variable portions are great for people who want the security of knowing that their repayments won’t change on the fixed portion and the flexibility of knowing that they can pay extra repayments into the variable portion. So if you want the best of both worlds, splitting your home loan might be the option for you.

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?

When it comes to managing your home loan, an offset account can be a powerful tool if used correctly.

How does it work?
The balance in the offset account is subtracted from the outstanding mortgage balance, reducing the amount on which interest is calculated. As a result, members can effectively lower their interest expenses and potentially shorten the loan term.

Interest savings:
An offset account is a transaction account linked to your home loan. The balance in this account is offset against your outstanding mortgage balance, reducing the amount on which interest is charged. By maintaining a higher balance in the offset account, members can save on interest costs over the life of the loan.

Flexibility and accessibility:
Offset accounts provide members with easy access to their funds. It functions like a regular transaction account, allowing you to deposit and withdraw money as needed. This flexibility ensures that your funds are readily available for day-to-day expenses while still offsetting your home loan interest.

Reduced interest payments:
By utilising an offset account effectively, members can decrease the amount of interest they pay on their home loan. The interest is calculated on the outstanding loan balance minus the balance in the offset account. This means that the more money you keep in the offset account, the less interest you'll be charged.

Potential for faster loan repayment:
With an offset account, members can accelerate their home loan repayment. By maintaining a higher balance in the offset account, the interest savings can be substantial, enabling you to pay off your loan sooner than the original loan term.

Potential Tax advantages:
The interest earned in a regular savings account is generally taxable. However, the interest saved through an offset account is not considered income, providing potential tax advantages for members. This can be particularly beneficial for individuals in higher tax brackets.

Easy money management:
An offset account can be a valuable tool for members looking to manage their finances effectively. It allows you to pool your income, savings, and expenses in a single account. By consolidating your funds, you can better monitor your financial position, reduce interest expenses, and potentially pay off your loan faster.

Remember, it's important to consult with a financial advisor or an accountant to determine if an offset account is suitable for your specific circumstances and financial goals.

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!