Ready for a long-term home loan relationship?

Being a home owner means committing to a long-term relationship. Our quick checklist outlines what you need to know before you take the leap. Ask yourself these questions and evaluate if you’re ready for the next step.

Do you know where your deposit is coming from?

Saving for a deposit is tough, especially if you’re already paying rent. You need a minimum of 5%, but lenders prefer 10% to cover all the costs of buying a home.

With a smaller deposit, you’re going to pay lender’s mortgage insurance (LMI), which can add tens of thousands to your loan. Some lenders let you add LMI to your home loan total and pay it off as part of your mortgage, but some need it upfront before they’ll approve your home loan.

Every little bit helps when you’re getting a deposit together. Check your nest egg is sitting in a high interest savings account so your money is working for you. Term deposit accounts can help you avoid the temptation to drip into it. 

Do you understand the guarantor process?

If the lump sum is not achievable, a guarantor might be an option. Having a family member use their equity to guarantee your loan is a smart way around a lump sum deposit. Remember, you still need to have the funds to make your repayments and for other upfront costs. 

Have you considered the other costs in buying a home?

You need some upfront cash to cover costs of the buying process like building and pest inspections, stamp duty, conveyancing (the process of transferring property ownership), council rates and settlement fees. Plus, you might need a removalist or pay to break a lease. Use an online calculator to work out your costs to buy.

Are you eligible for a first home buyers grant?

This can make a big difference to your deposit. In Queensland, the First Home Buyers Grant is on the table for new homes. Not everyone is eligible, so don't rely on it until you’ve done your homework.

Have you investigated different types of home loans?

There are many ways to structure a home loan. Some of the choices include:

  • variable interest rate loans – your lender can change the rate at any time, usually when the Reserve Bank changes the official cash rate. It works in your favour when rates are low, but you take a risk of rates and repayments going up.
  • fixed rate loans – you can usually lock in an interest rate for one to five years. Fixed rates give security of known repayments, but are usually a higher rate than variable loans without the flexible features
  • line of credit loans – if you have equity in your loan, you can refinance for access to a revolving loan. Popular for renovators, the money is there if you need it – but it’s usually at a higher interest rate.

When you’ve fallen in love with your dream property it can be hard to make a rational decision. Ensure you’ve researched all of the possible loan options to stop your heart ruling your head.

Do you understand how interest rates affect your monthly repayments?

It’s important to know exactly how much you will be paying in repayments each month, run the numbers, and be realistic about how much you need to live. Interest rates are low now, but what would happen if they jumped to 7%? Or more? Do your sums with a repayment calculator and see if you could still get by. A cheaper property might mean coping with a bump up without getting stressed.

Posted in

First Home Buyer

More articles

Protect yourself from scams and fraud

No-one is immune from being scammed. You can’t always avoid being targeted by scammers who want to separate you from your money, but you can protect yourself by learning about scams, how they work, and what to do if it happens to you.

Read article

What is the Australian Government Guarantee?

The Australian Government Guarantee, also known as the Financial Claims Scheme (FCS), provides protection for funds deposited in eligible financial institutions up to a limit of $250,000 for each account holder.

Read article

QBANK announces changes to interest rates

Following the decision by the Reserve Bank to reduce the official cash rate, QBANK will reduce interest rates on its variable rate home loan products for owner occupiers and investors by 0.15% per annum. Mortgage secured overdraft rates will also be reduced by 0.15% per annum.

Read article