A guide for first home owners

A guide for first home owners

If you’ve made the decision to buy your first home it’s a pretty safe bet that you’re feeling a little daunted by the whole process. Add to this that as of  January 2016 the NSW government’s First Home Owner Grant will be reduced from $15,000 to $10,000 and you might getting a little overwhelmed.  But, armed with the right information and knowledge, taking out a first home loan to secure your dream property doesn’t have to be scary.

Here’s our guide to help you find your first home loan.

1. How much you can borrow vs how much you should borrow

The first step you should take is to determine how much you can borrow as a first home buyer. Lenders will determine how big a home loan to lend you by assessing the amount of monthly repayments you can comfortably afford, among other factors. Experts say that spending above 30 percent of your household income on a home loan could lead to mortgage stress. This is where it’s important to remeber that even though you can borrow a certain amount it doesn’t always mean that you should. Be honest with yourself about how much you can afford and consider possible unexpected events in the future such as the loss of a job or arrival of a child. 

2. Calculate your mortgage repayments

Use a mortgage calculator to help work out the cost of servicing your first home owner loan. RateCity has a free home loan calculator, which you can use to estimate mortgage repayments – it also helps you calculate the interest you might save by making additional repayments, for instance. When budgeting for home loan repayment costs, make sure you factor in the possibility of rising interest rates. As a rule of thumb, allow for rate hikes of 2 percentage points, which could bump up monthly repayments by more than $350. Factor these payments into a montly budget and consider how much money you would have left over for living expenses. Don’t forget to consider any roadbumps that may occur in the future and discuss how yout repayments could be made in the event of a lifestlye change. 

3. Compare home loans

Finally, compare home loans online to narrow down a home loan that is going to best suit your needs. A bit of time spent comparing home loans in the beginning could mean great savings for you in the future. Having a look at the options on the market means that you will be making a n informed decision which could prevent you coming across issues in the future. Gather as much comparative info as you can and get yourself a good deal.

By following these three steps you will be well on your way to estbalishing what you can afford and who will offer you the best deals. From there it’s time to start finding that dream home with the confidence of knowing you have considered the financial side of things. Visit the RateCity home loans guide for further information on seruring a loan.

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Learn more about home loans

How can I get a home loan with no deposit?

Following the Global Financial Crisis, no-deposit loans, as they once used to be known, have largely been removed from the market. Now, if you wish to enter the market with no deposit, you will require a property of your own to secure a loan against or the assistance of a guarantor.

Mortgage Balance

The amount you currently owe your mortgage lender. If you are not sure, enter your best estimate.

How does a redraw facility work?

A redraw facility attached to your loan allows you to borrow back any additional repayments that you have already paid on your loan. This can be a beneficial feature because, by paying down the principal with additional repayments, you will be charged less interest. However you will still be able to access the extra money when needed.

How will Real Time Ratings help me find a new home loan?

The home loan market is complex. With almost 4,000 different loans on offer, it’s becoming increasingly difficult to work out which loans work for you.

That’s where Real Time RatingsTM can help. Our system automatically filters out loans that don’t fit your requirements and ranks the remaining loans based on your individual loan requirements and preferences.

Best of all, the ratings are calculated in real time so you know you’re getting the most current information.

How often is your data updated?

We work closely with lenders to get updates as quick as possible, with updates made the same day wherever possible.

What happens to your mortgage when you die?

There is no hard and fast answer to what will happen to your mortgage when you die as it is largely dependent on what you have set out in your mortgage agreement, your will (if you have one), other assets you may have and if you have insurance. If you have co-signed the mortgage with another person that person will become responsible for the remaining debt when you die.

If the mortgage is in your name only the house will be sold by the bank to cover the remaining debt and your nominated air will receive the remaining sum if there is a difference. If there is a turn in the market and the sale of your house won’t cover the remaining debt the case may go to court and the difference may have to be covered by the sale of other assets.  

If you have a life insurance policy your family may be able to use some of the lump sum payment from this to pay down the remaining mortgage debt. Alternatively, your lender may provide some form of mortgage protection that could assist your family in making repayments following your passing.

How common are low-deposit home loans?

Low-deposit home loans aren’t as common as they once were, because they’re regarded as relatively risky and the banking regulator (APRA) is trying to reduce risk from the mortgage market.

However, if you do your research, you’ll find there is still a fairly wide selection of banks, credit unions and non-bank lenders that offers low-deposit home loans.

Who offers 40 year mortgages?

Home loans spanning 40 years are offered by select lenders, though the loan period is much longer than a standard 30-year home loan. You're more likely to find a maximum of 35 years, such as is the case with Teacher’s Mutual Bank

Currently, 40 year home loan lenders in Australia include AlphaBeta Money, BCU, G&C Mutual Bank, Pepper, and Sydney Mutual Bank.

Even though these lengthier loans 35 to 40 year loans do exist on the market, they are not overwhelmingly popular, as the extra interest you pay compared to a 30-year loan can be over $100,000 or more.

Mortgage Calculator, Loan Amount

How much you intend to borrow. 

Mortgage Calculator, Interest Rate

The percentage of the loan amount you will be charged by your lender to borrow. 

How much information is required to get a rating?

You don’t need to input any information to see the default ratings. But the more you tell us, the more relevant the ratings will become to you. We take your personal privacy seriously. If you are concerned about inputting your information, please read our privacy policy.

Mortgage Calculator, Repayment Frequency

How often you wish to pay back your lender. 

What factors does Real Time Ratings consider?

Real Time RatingsTM uses a range of information to provide personalised results:

  • Your loan amount
  • Your borrowing status (whether you are an owner-occupier or an investor)
  • Your loan-to-value ratio (LVR)
  • Your personal preferences (such as whether you want an offset account or to be able to make extra repayments)
  • Product information (such as a loan’s interest rate, fees and LVR requirements)
  • Market changes (such as when new loans come on to the market)

What is an ombudsman?

An complaints officer – previously referred to as an ombudsman -looks at formal complaints from customers about their credit providers, and helps to find a fair and independent solution to these problems.

These services are handled by the Australian Financial Complaints Authority, a non-profit government organisation that addresses and resolves financial disputes between customers and financial service providers.