So you’re buying your first home? You may be filled with excitement but also trepidation about signing off on your first home loan.
There will be advice flying your way from every direction and while you should take it on board, make sure you also carry out your own research so you find what best suits you.
There are thousands of Australian home loans to choose from but typically you’ll choose from ‘variable rate’ and ‘fixed rate’ home loans, with a fair few first home buyers also considering a loan with a ‘honeymoon rate’ attached.
If you’re heading into the world of home loans, here are some key terms to get your head around early on.
This is a popular home loan choice for first time home buyers in Australia. Variable mortgages adjust with the ebb and flow of the official cash rate set by the Reserve Bank of Australia. In the long term, they are often cheaper than fixed rate mortgages.
The advantage with a fixed rate mortgage is that the interest rate is set for a period of time, which is generally terms of 1, 3 or 5 years. This provides a first home buyer with peace of mind, knowing what their home loan repayments will be on a regular basis.
Take a look at some fixed loan options below:
Lenders targeting first time home buyers will frequently offer a cut-price rate over the course of a “honeymoon” period, which is usually 6 to 12 months. However, when the initial period is over, the loan rate reverts to a standard variable rate, which is generally higher than the honeymoon rate.
Given the broad range of home loans available to a first home buyer, it is important to do the research before signing up to a mortgage.
- Low upfront interest rate
- Can assist with budgeting early on
- Revert rate will generally be much higher
- May cause budgeting problems when repayments increase
First Home Owners Scheme
A Federal Government initiative, the First Home Owners Scheme (also called the ‘First Home Owners Grant’) encourages first timers to enter the property market. For more information on the First Home Owners Scheme go to www.firsthome.gov.au.
For more information on taking out your first home loan please visit the link below. The guide will give you an overview of the fees and features you need to be aware of when comparing home loans.
To find out more about how much you can borrow you can use the calculator link below. This calculator will help in estimating what you can afford to borrow using details of your income and outgoing expenses.