Seven tips to help you get your first home in 2021

Seven tips to help you get your first home in 2021

Your first home doesn't have to be a pipe dream this year. What ideas and tips can you use to make sure you get on the property ladder in 2021?

It's not easy to escape the rent race and jump into home ownership, especially as the housing market returns to vibrant health once again. Fortunately, there are tips that can help you save and secure a home, and they might even help your financial health overall. 

1. Start saving by throwing money into an account you won't touch

Buying a home takes money. Lots and lots of money. You don't need us to tell you this, and you're probably already saving for that deposit, but it'll take more than that, with fees and stamp duty a possible addition depending on when you buy, thanks to some of those government changes going into action in 2021

Some bank accounts will actually offer ways to round up some of your purchases to throw these extra bits of coin into a kitty for big goals, and while they might start as mere cents, they can grow. 

But if you take that a bit further, you can proactively begin to save for that big purchase. 

Start throwing some of those random purchases you'd normally consider into a separate account, rather than buying them outright. The coffee you don't really need, the bottle of wine you'd like but could live without. Take the small purchases before you make them, decide what's more important, and throw those savings into a special account made for your home loan. 

2. Check your credit score early on and make it better

Now that your money is beginning to add up, take some time to work on your credit score.

It's a big part of your financial health overall, and the more you understand about your credit score, the better your chances will be to score a low rate on your home loan, and on other financial services you're hoping to use later in life.

Credit scores are measured by how many credit-based products you have -- such as a loan or a credit card -- and how often you pay them back in a timely way. It can affect utilities and other financial responsibilities, and if you're talking out a home loan, ensuring you can demonstrate that you're responsible with money is clearly of great importance when you're looking to take out a lot of money to buy something like a home. 

3. Work out your borrowing power

Your credit score is one measurement you need to consider, but another is how much you can actually afford to take out overall. 

It sounds a little like a secret superpower, but really it's one of the most important factors, taking your financials, your expenses, your dependents, and the type of investment you're looking at, and bringing it all together for one number. 

A borrowing power calculator can help you quickly work out how much you can borrow, and it's one of the first steps before jumping in and applying for a home loan.

4. Find out if you're eligible for assistance

Your borrowing power gives you a number, but if you're eligible for any assistance, that number might be greatly helped. Depending on where you live in Australia, you may find a government grant available to help you buy a home, or even build one.

The First Home Owners Grant (FHOG) provides funding for first home buyers of various amounts in different states across the country, while the First Home Loan Deposit Scheme (FHLDS) offers thousands of Australians the chance to buy a home with a smaller deposit and save on Lender's Mortgage Insurance (LMI), dependent on their application and the property they intend to buy.

There's also the HomeBuilder scheme, which sees the Australian government awarding as much as $25,000 for recipients, handy if they want to build a new home if they've purchased a plot, or even to do renovations on an existing property. 

5. Consider a move outside of the city limits

No matter where you buy in Australia, you can expect the purchase price of a home to be hefty, but both the type of property and the location can impact the pricing considerably. Australia's housing market is sure up there, and it's only increasing. While it had a bit of a stall in 2020, it’s already made up the losses and posting record values again.

Many pricey properties can be closer to the city of major metropolitan areas in Australia, so if you're looking for your first home, consider expanding your search to ever so slightly outside of your comfort zone. That should not only inform how much you need to spend, but how it impacts your borrowing power overall. 

6. Research and compare your home loan options diligently

When you have an idea of where you're buying and how much the area costs, it's time to research your home loan options. Take a glance at the comparison rates offered by competing lenders, and work out which home loan provider will service your needs best of all. 

There's no one quick fix solution for all of these, with home loan options differing greatly for everyone. You might want something simple that gets you the loan, or you might want something with more flexibility that allows you to withdraw some of the loan from a redraw account. 

Compare your options and work out what's best for you, because there are a lot of choices. 

7. Talk to a broker

Alternatively, you may want to consider talking to a home loan specialist, with a mortgage broker able to help you do some of the work needed in order to get that first home. 

Even if you've researched, filtered, and compared rates until you feel like you seemingly know everything, a broker can provide a deeper understanding of how your finances fit in with your housing aspirations, and work with a bank or lender to secure a home loan with a competitive comparison rate. 

 

 

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Learn more about home loans

What is a credit file?

A comprehensive summary of your credit history from an authorised credit reporting agency.

It includes your credit details, credit taken in the last five years, any default payments or credit infringements, arrears, repayment history, bankruptcy filings and a list of credit applications (including unapproved credit applications) in addition to your personal details.

Is there a limit to how many times I can refinance?

There is no set limit to how many times you are allowed to refinance. Some surveyed RateCity users have refinanced up to three times.

However, if you refinance several times in short succession, it could affect your credit score. Lenders assess your credit score when you apply for new loans, so if you end up with bad credit, you may not be able to refinance if and when you really need to.

Before refinancing multiple times, consider getting a copy of your credit report and ensure your credit history is in good shape for future refinances.

Can I take a personal loan after a home loan?

Are you struggling to pay the deposit for your dream home? A personal loan can help you pay the deposit. The question that may arise in your mind is can I take a home loan after a personal loan, or can you take a personal loan at the same time as a home loan, as it is. The answer is that, yes, provided you can meet the general eligibility criteria for both a personal loan and a home loan, your application should be approved. Those eligibility criteria may include:

  • Higher-income to show repayment capability for both the loans
  • Clear credit history with no delays in bill payments or defaults on debts
  • Zero or minimal current outstanding debt
  • Some amount of savings
  • Proven rent history will be positively perceived by the lenders

A personal loan after or during a home loan may impact serviceability, however, as the numbers can seriously add up. Every loan you avail of increases your monthly installments and the amount you use to repay the personal loan will be considered to lower the money available for the repayment of your home loan.

As to whether you can get a personal loan after your home loan, the answer is a very likely "yes", though it does come with a caveat: as long as you can show sufficient income to repay both the loans on time, you should be able to get that personal loan approved. A personal loan can also help to improve your credit score showing financial discipline and responsibility, which may benefit you with more favorable terms for your home loan.

How long does Bankwest take to approve home loans?

Full approval for a home loan usually involves a property valuation, which, Bankwest suggests, can take “a week or two”. As a result, getting your home loan approved may take longer. However, you may get full approval within this time if you applied for and received conditional approval, sometimes called a pre-approval, from Bankwest before finalising the home you want to buy.  

Another way of speeding up approvals can be by completing, signing, and submitting your home loan application digitally. Essentially, you give the bank or your mortgage broker a copy of your home’s sale contract and then complete the rest of the steps online. Bankwest has claimed this cuts the approval time to less than four days, although this may only happen if your income and credit history can be verified easily, or if your home’s valuation doesn’t take time.

How can I get a home loan with bad credit?

If you want to get a home loan with bad credit, you need to convince a lender that your problems are behind you and that you will, indeed, be able to repay a mortgage.

One step you might want to take is to visit a mortgage broker who specialises in bad credit home loans (also known as ‘non-conforming home loans’ or ‘sub-prime home loans’). An experienced broker will know which lenders to approach, and how to plead your case with each of them.

Two points to bear in mind are:

  • Many home loan lenders don’t provide bad credit mortgages
  • Each lender has its own policies, and therefore favours different things

If you’d prefer to directly approach the lender yourself, you’re more likely to find success with smaller non-bank lenders that specialise in bad credit home loans (as opposed to bigger banks that prefer ‘vanilla’ mortgages). That’s because these smaller lenders are more likely to treat you as a unique individual rather than judge you according to a one-size-fits-all policy.

Lenders try to minimise their risk, so if you want to get a home loan with bad credit, you need to do everything you can to convince lenders that you’re safer than your credit history might suggest. If possible, provide paperwork that shows:

  • You have a secure job
  • You have a steady income
  • You’ve been reducing your debts
  • You’ve been increasing your savings

How much deposit do I need for a home loan from ANZ?

Like other mortgage lenders, ANZ often prefers a home loan deposit of 20 per cent or more of the property value when you’re applying for a home loan. It may be possible to get a home loan with a smaller deposit of 10 per cent or even 5 per cent, but there are a few reasons to consider saving a larger deposit if possible:

  • A larger deposit tells a lender that you’re a great saver, which could help increase the chances of your home loan application getting approved.
  • The more money you pay as a deposit, the less you’ll have to borrow in your home loan. This could mean paying off your loan sooner, and being charged less total interest.
  • If your deposit is less than 20 per cent of the property value, you might incur additional costs, such as Lenders Mortgage Insurance (LMI).

How do I take out a low-deposit home loan?

If you want to take out a low-deposit home loan, it might be a good idea to consult a mortgage broker who can give you professional financial advice and organise the mortgage for you.

Another way to take out a low-deposit home loan is to do your own research with a comparison website like RateCity. Once you’ve identified your preferred mortgage, you can apply through RateCity or go direct to the lender.

How can I get ANZ home loan pre-approval?

Shopping for a new home is an exciting experience and getting a pre-approval on the loan may give you the peace of mind that you are looking at properties within your budget. 

At the time of applying for the ANZ Bank home loan pre-approval, you will be required to provide proof of employment and income, along with records of your savings and debts.

An ANZ home loan pre-approval time frame is usually up to three months. However, being pre-approved doesn’t necessarily mean you will get your home loan. Other factors could lead to your home loan application being rejected, even with a prior pre-approval. Some factors include the property evaluation not meeting the bank’s criteria or a change in your financial circumstances.

You can make an application for ANZ home loan pre-approval online or call on 1800100641 Mon-Fri 8.00 am to 8.00 pm (AEST).

Can I get a NAB home loan on casual employment?

While many lenders consider casual employees as high-risk borrowers because of their fluctuating incomes, there are a few specialist lenders, such as NAB, which may provide home loans to individuals employed on a casual basis. A NAB home loan for casual employment is essentially a low doc home loan specifically designed to help casually employed individuals who may be unable to provide standard financial documents. However, since such loans are deemed high risk compared to regular home loans, you could be charged higher rates and receive lower maximum LVRs (Loan to Value Ratio, which is the loan amount you can borrow against the value of the property).

While applying for a home loan as a casual employee, you will likely be asked to demonstrate that you've been working steadily and might need to provide group certificates for the last two years. It is at the lender’s discretion to pick either of the two group certificates and consider that to be your income. If you’ve not had the same job for several years, providing proof of income could be a bit of a challenge for you. In this scenario, some lenders may rely on your year to date (YTD) income, and instead calculate your yearly income from that.

Why should I get an ING home loan pre-approval?

When you apply for an ING home loan pre-approval, you might be required to provide proof of employment and income, savings, as well as details on any on-going debts. The lender could also make a credit enquiry against your name. If you’re pre-approved, you will know how much money ING is willing to lend you. 

Please note, however, that a pre-approval is nothing more than an idea of your ability to borrow funds and is not the final approval. You should receive the home loan approval  only after finalising the property and submitting a formal loan application to the lender, ING. Additionally, a pre-approval does not stay valid indefinitely, since your financial circumstances and the home loan market could change overnight.

 

 

Remaining loan term

The length of time it will take to pay off your current home loan, based on the currently-entered mortgage balance, monthly repayment and interest rate.

What are the pros and cons of no-deposit home loans?

It’s no longer possible to get a no-deposit home loan in Australia. In some circumstances, you might be able to take out a mortgage with a 5 per cent deposit – but before you do so, it’s important to weigh up the pros and cons.

The big advantage of borrowing 95 per cent (also known as a 95 per cent home loan) is that you get to buy your property sooner. That may be particularly important if you plan to purchase in a rising market, where prices are increasing faster than you can accumulate savings.

But 95 per cent home loans also have disadvantages. First, the 95 per cent home loan market is relatively small, so you’ll have fewer options to choose from. Second, you’ll probably have to pay LMI (lender’s mortgage insurance). Third, you’ll probably be charged a higher interest rate. Fourth, the more you borrow, the more you’ll ultimately have to pay in interest. Fifth, if your property declines in value, your mortgage might end up being worth more than your home.

Can I change jobs while I am applying for a home loan?

Whether you’re a new borrower or you’re refinancing your home loan, many lenders require you to be in a permanent job with the same employer for at least 6 months before applying for a home loan. Different lenders have different requirements. 

If your work situation changes for any reason while you’re applying for a mortgage, this could reduce your chances of successfully completing the process. Contacting the lender as soon as you know your employment situation is changing may allow you to work something out. 

How do I refinance my home loan?

Refinancing your home loan can involve a bit of paperwork but if you are moving on to a lower rate, it can save you thousands of dollars in the long-run. The first step is finding another loan on the market that you think will save you money over time or offer features that your current loan does not have. Once you have selected a couple of loans you are interested in, compare them with your current loan to see if you will save money in the long term on interest rates and fees. Remember to factor in any break fees and set up fees when assessing the cost of switching.

Once you have decided on a new loan it is simply a matter of contacting your existing and future lender to get the new loan set up. Beware that some lenders will revert your loan back to a 25 or 30 year term when you refinance which may mean initial lower repayments but may cost you more in the long run.