Frequently Asked Questions

Unsurprisingly, the most common question that first home buyers ask is how much they can borrow. There is no one size fits all when it comes to how much you can borrow (also called your borrowing capacity), so partnering with a mortgage broker who can crunch the numbers for you can take much of this uncertainty away. Lenders will assess your income and expenses and you’ll need to show that you can afford home loan repayments a few percentage points higher than your loan, in case rates were to increase in the future. But there may also be some ways to increase your borrowing power by reducing your expenses. Some examples of how this can be done include creating and sticking to a budget, and looking for ways to save by shopping around for cheaper insurances, reducing your credit limits, paying off personal loans or other debts, taking packed lunches to work, and using public transport.

Loans come in all shapes and sizes, with different costs and different features. Choosing a Loan on the basis of Interest Rate alone means passing up the opportunity to consider all the other aspects of a Loan product which may be important to your ability to use the loan, not just for the immediate purchase, but as a tool to assist with your long term wealth building strategy. When looked at from the broader perspective, Interest Rate becomes far less important when compared to other features and benefits, and how they contribute to helping you to manage your money and achieve your goal.

Just like borrowing capacity, the required deposit will vary depending on a number of factors including the purchase price and the borrowers’ circumstances. Generally speaking, a 20% deposit plus the costs of purchasing a property may be enough to avoid Lender’s Mortgage Insurance (LMI). However, if you don’t mind paying LMI, 5-10 per cent of the purchase price may be acceptable to some lenders depending on the type of home being purchased. Having a guarantor may also help you avoid needing to have a 20% deposit.

This will depend on individual circumstances. If a client wants certainty of repayment, then a fixed rate is a good option as they will be able to lock their repayments at a certain rate for a certain time frame. This can give comfort in knowing what the commitment will be and can be good in a rising interest rate market. Fixed rates are generally an inflexible product and will have restrictions on things like extra repayments on a home loan, ability to redraw or have an offset account against the fixed rate loan.

Variable rates will move with the fluctuations of the interest rate market, but you tend to have greater flexibility with these products, with the ability to have an offset account, make unlimited extra repayments and then redraw those extra repayments.

Understanding the lingo of buying and financing a property can help make the process less stressful, and LMI is just one of the many acronyms that you’ll become intimately familiar with during the course of buying your first home. LMI typically applies if you buy a home with less than a 20% deposit. It’s an insurance that protects the lender if you can’t keep up with your payments.

Not necessarily. The first consideration should be how appropriate each product is for the client’s situation now as well as in the future. Flexibility of the product to change with the changing circumstances in a client’s life need to be taken into consideration. The upfront, ongoing and discharge fees also need to the considered. This will give a well-rounded product and will serve the client’s best needs for the current position as well as the future.

This means that a quick check on your serviceability of a loan has been done and it is calculated that you should be able to make mortgage repayments on the amount you have been pre approved for. However, it is not binding and cannot be used to make an offer on a property. It is important to get a full or unconditional approval before proceeding with any property purchase. This involves completing a home loan application and providing all the necessary supporting documentation.

Understanding all the costs involved in buying a property upfront is important, and many first home buyers ask this question early on when meeting with a broker. Costs of buying a property may include:

The costs of purchasing a property vary by state/territory and also by service provider, So it’s good to get a few quotes before agreeing to go with the first conveyancer or insurance provider you find. We can help you work out what costs will apply to you based on where you live, the type of property you’re buying and other factors, like the type of home loan you want and the size of your deposit.

A mortgage offset account can reduce interest on your loan. Your mortgage is linked to an account into which your salary and other cash can be deposited. You can then withdraw the funds to pay your bills. The interest is calculated on the net balance on a daily basis. For example, if you have a loan of $400,000 and have $20,000 in your offset account, the amount of interest you pay will be calculated on only $380,000 ($400,000 - $20,000). 

Extra Repayments/Redraw Facility You can make extra repayments and create a surplus for times when you have unexpected expenses such as plumbing or electrical repairs or for when you're not receiving a rental income. Some loans with this feature allow you to skip a mortgage repayment if you have enough funds in credit to cover that mortgage repayment.

If the brokers are an investor themselves, they can have a better understanding of the structure that may suit the client and their future-plans or goals in an investing sense. They will also know which banks have the best policy for certain situations and understand the different borrowing capacities with the different lenders and how to use this for the client’s best advantage.

Your entitlements will vary depending on:

Under the First Homeowner Grant (FHOG), a once-off payment is payable to first home owners that satisfy all the eligibility criteria. Note: some states/territories have introduced a cap where first home buyers purchasing a property above this will not qualify to receive the grant. The government has established a website with all the relevant grants and schemes http://www.firsthome.gov.au