To secure a bank loan, most lenders require home buyers to have a minimum 20% deposit. So, for example if you are buying a home for $480,000, lenders expect you to have $96,000 to put towards the cost of the property. The good news is that this can be less for First Home Buyers and this information guide helps to explain how. It should be noted that property developers require a deposit of 10% or less to secure the property that you’re purchasing.
Lenders Mortgage Insurance is an insurance policy that protects the lender from financial loss if the purchaser is unable to meet their home loan repayments. In that case, if the home loan goes into default the home may have to be sold. If it is sold for less than the purchase amount and does not cover the lender’s costs, the lender can claim the shortfall from the mortgage insurer. Mortgage insurance is often a requirement by lenders if you borrow more than 80% of the value of the property.
Stamp Duty is a tax imposed by State and Territory governments on the sale of residential properties. It is paid over and above the purchase price of a home and is calculated on a number of factors including the price of the property, location and whether the purchaser is a first home buyer.
Conveyancing and legal fees are the costs associated with completing the legal paperwork required when buying a home. This can either be undertaken by a Settlement Agent, Conveyancer or a Lawyer and includes the preparation, execution, and lodgement of various legal documents to enable a legal sale of the land and property.
A variable rate home loan means that the interest rates can change up or down at any time. Variable rate loans typically offer more flexibility than fixed rate home loans. For example, many variable rate home loans let you make additional repayments to pay off your loan faster, and then let you redraw these additional funds if you need them in the future. Others have an offset feature, which could help to reduce the amount of interest you pay.
A potential drawback of a variable rate home loan is that interest rates can change at any time. This means they can go up and down. It’s a good idea to consider whether you can afford higher loan repayments if interest rates were to go up.
A fixed rate home loan can give you peace of mind that the required repayment amount will be the same during the period of the fixed term, which can be very handy when you are trying to stick to a budget.
You can generally choose the time period you would like to fix your interest rate for. Depending on the lender, this could be for up to 10 years. Generally, at the end of the fixed term your loan will roll over to a variable rate, unless you choose to repeat the process.