Taking out a home loan can be a nerve wracking experience, particularly for first time buyers. The key to making the experience not just bearable but fruitful is to understand exactly what you are taking on.
Here are the questions you should know the answer to before getting your home loan.
Are you eligible for government assistance?
There are a variety of both state and federally funded concessions and grants for property buyers. Notably the First Home Owner Grant (FHOG) scheme can be a significant aid to first-time buyers.
What is the interest rate?
Your interest rate is offered to you by the lender and will be based on:
- The loan amount
- Your credit score
Along with the loan balance and term, your interest rate is what determines the amount you pay every month. If you are unhappy with the interest rate you are offered, you can try a different lender or alternatively improve your credit score to qualify you for lower interest rates.
How much can you afford to repay?
Loan repayment calculators are a great way to work out how much you need to pay and whether you want to do so monthly or fortnightly. Ask yourself whether you can afford to pay more than what has been allotted and how this would impact your overall financial plans. Make sure you understand exactly how much you will be paying every month and that you have considered insurance and taxes payments in your budgeting calculations.
Fixed or Variable rate loan?
Fixed-rate home loans give a consistent rate throughout their lifetime, which can be anything from 10-30 years. This has the advantage of giving you certainty over the amount you will repay and ensures you can plan ahead.
Variable rate loans have a changeable interest rate after a certain fixed period, allowing you to take advantage of any future reductions to interest rates. If you do take up this option, make sure that you understand how often the rates will change and which index the rate is tied to.
What is the minimum down payment?
Home loans commonly require a 20 per cent down payment, however different loan products can have varying requirements.
If you are looking for help with your home loan, contact us today.