Latest News - January

Applying for your first mortgage: Tips for First Home Buyers

Planning to build your first home? Congratulations! That will most likely mean you are gearing up to apply for your very first mortgage too… talk about peak adulting! Building a home is a big milestone, and when a mortgage gets thrown in the mix, things can get a little overwhelming. But it doesn’t have to be so. Here, we will demystify some of the complicated financial jargon that gets thrown around, with a few helpful tips along the way.

Do the groundwork

Before you apply for any loan, it is important to have done the necessary groundwork. Do you know how much you can borrow or which kind of loan is the best for you?

To figure out the former, a mortgage calculator will come in handy. There are many available online, your bank will most likely have one that is easy to find and use. A mortgage calculator isn’t the be-all and end-all. However, it will provide a helpful estimate of how much a lender will allow you to borrow. This will determine how much budget you have to work with to buy and build your home.

Also, ensure you are aware of any criteria that lenders will take into account when accessing your loan application, such as credit history and ability to service a loan.

Fixed or variable rate?

A mortgage can come in one of two distinct forms. With a fixed-rate home loan, the interest is fixed for a set period of time, often 1, 3 or 5 years. This means you will know exactly what your monthly repayments will be, which allows you to set any financial goals with confidence.

When you take out a variable rate mortgage, your individual lender sets the interest rate. This means rates can increase at any time. On the other hand, the rates could always decrease, which would ultimately reduce your repayment amount.

Save, save, save to reduce your mortgage

It goes without saying that the more you save towards your first home, the less money you will have to borrow to purchase or build it. While this won’t simply translate into fewer repayments, it should make getting a mortgage a lot easier.

Basically, now is the time to draw up a budget and stick to it. Even better, put aside some income each month into a high-interest savings account to really make the most of your savings.

Take advantage of first home buyer subsidies & rebates

Around Australia, first home buyers can take advantage of various government incentives such as stamp duty exemptions or concessions, and first homeowner grants. In Victoria, the government offers $10,000 for new builds up to $750,000. This is intended to make it a little easier to get home buyers into their first home.

Consider using a mortgage broker

As with most things, it pays to look around when seeking out a home loan. While it’s tempting to just speak to the financial institution you already bank with, the mortgage market is competitive and you may find a better rate by going elsewhere.

Utilising the services of a mortgage broker may also help you along immensely. A good mortgage broker has access to many lenders and knows their lending application processes. This should help save you time and money, plus give you the best chance of getting your mortgage when you need it. Their professional advice should also give you some insight into which home loan is right for you, taking into account your unique personal circumstances.

Get pre-approved

Step 1: work out what and where you want to buy. Step 2: have an idea of how much you need to borrow. Now it’s time to get conditional approval. This isn’t a set in stone offer of finance, but a statement that you should be able to borrow up to a certain amount. This is dependent on your ability to provide information to support the figures you’ve based your application on. This might include salary, savings, assets and expenses, and the value of the home or house and land package you’re purchasing as verified by a professional valuer.

Conditional approval typically lasts for 90 days and will help give peace of mind in your property search. If you choose to use a mortgage broker, they’ll generally apply for conditional approval on your behalf.

Confidence is key

Lastly, many first home buyers put off applying for a home loan or purchasing their first house due to anxiety about the property market conditions. How much they’ve saved, whether they can get a mortgage in the first place, the list goes on. These are totally reasonable concerns, but try not to let these hurdles get in the way of your aspirations.

The market can move rapidly, so it pays to be both decisive and confident. Meaning, if you’re unsure about lending conditions or mortgage loans, do your research. Find out how to get the ball rolling on your application, or what to ask a mortgage broker if you go down that path.