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B uying your first home is incredibly exciting and, let’s be honest, a bit scary too. One minute you’re daydreaming about your dogs running around the backyard while you sip coffee with your partner, and the next you’re knee-deep in paperwork, interest rates, and words that make your head spin.
Take a breath. This is completely normal. That’s exactly why first-time buyer guides like this exist. They make home loans less confusing. Everything you need to know is right here.
What Exactly Is a Home Loan?
Some people feel awkward asking this because it seems “obvious”. But ask away. Any professional worth their salt will gladly explain.
A home loan, or mortgage, is money you borrow from a lender to buy a property. Pretty simple on the surface. You’ll enter into a long-term agreement that involves paying interest, regular repayments, and yes, a fair bit of paperwork. Think of it as a lease to own arrangement where the bank keeps a stake in your home until the loan is paid off.
It’s a big commitment, but when handled well, the right mortgage can be one of the smartest financial decisions you ever make.
What to Do Before You Apply
Here are a few things to sort out before submitting that home loan application:
- In Australia, checking your credit report is free and won’t affect your score. Do it. Clean up any old debts or issues beforehand.
- Get pre-approval. It gives you a clear idea of how much you can borrow and makes you a more appealing buyer to sellers.
- Don’t just focus on the deposit. You’ll also need to budget for setup fees, stamp duty, building inspections, legal costs, moving expenses and more. Be realistic so you’re not caught off guard.
Types of Home Loans Available
Here’s a look at the main types you’ll come across:
1. Variable Rate Loan: The interest rate moves with the market. It can go up or down, which means flexibility but also uncertainty.
2. Fixed Rate Loan: Your interest rate is locked in for a set period, usually one to five years. This makes budgeting easier, but extra repayments or changes are often restricted.
3. Split Loan: Part fixed, part variable. This option gives you a bit of certainty while still allowing some flexibility.
4. Interest-Only Loan: You pay only the interest for the first few years, not the principal. This keeps repayments lower early on, but your loan balance doesn’t reduce during that time. These are more common for investment properties than homes you plan to live in.
How Much Do You Need for a Deposit?
Deposit requirements can vary. Most lenders in Australia ask for at least five to ten percent. That said, 20 percent is often the magic number. Why? Because if your deposit is under 20 percent, you’ll usually need to pay Lenders Mortgage Insurance, or LMI.
For example, on a $600,000 home with a 10 percent deposit, LMI could cost you between $8,000 and $12,000 depending on the lender.
What’s the First Home Owner Grant (FHOG)?
If you’re buying your first home, you might be eligible for the First Home Owner Grant. The rules differ across states, but it’s typically available for newly built homes and can be worth up to $10,000 or more.
Some states offer stamp duty discounts or exemptions too. For example, in New South Wales and Victoria, eligible first home buyers may not have to pay stamp duty at all depending on the property value.
Still, it’s best to check the current rules with your state government or reach out to us if you’d like some help.
Final Thoughts
There’s a lot to take in when it comes to home loans, especially if it’s your first time. But you don’t need to figure it all out overnight or on your own. A first time buyer guide like this helps, but having someone in your corner matters even more.
At Finance Architect Solutions, we’re here to make the process clearer and the path smoother. Book a chat with us today and let’s talk about getting you into your first home.
