Home Loans for First Home Buyers

Home loan applications tend to be confusing to most first time home buyers. To give first home buyers a clear view on what to expect, here are some scenarios that they might deal with. Some buyers might deal with one or even all of them.

Stability is the priority of most start-up families and the loan that is most appropriate for them should be the one that has a low interest rate. This type of home loan has a fixed interest rate that is lower than the usual. However, it is not likely to be open for repayments but you can set the repayment amount to that value for the rest of the loan term.

On the other hand, fixed home loans carry some disadvantages too. If the official cash rate goes lower, your repayment stays at a higher rate. For this reason, some borrowers go for a variable home loan. The rate of which is highly dependent on the RBA cash rate and there is a possibility of a lower repayment if the RBA rate takes a dip.

Because of the volatility of market conditions, most first home buyers go for a split home loan that lets them enjoy the features of both a fixed and a variable home loan. This option balances the repayment terms between the certainty of a fixed home loan and the flexibility of a variable one.

New couples might not have extra money and they could go for a honeymoon home loan if they are keen in buying a home. The honeymoon is paid with a low interest rate for a honeymoon period which usually lasts from six months to a year. After which, the borrower must start repaying the principal loan. The honeymoon period can be used to save more finances.

For any home loan, the amount of your deposit depends on the property and the home loan type that you have. The usual deposit rate is about to ten percent of the property’s total value although some lenders would require a saving history for a minimum of six months before the deposit is allowed.

Aside from the deposit, there are other expenses involved like establishment fees, transfer fees, legal fees, loan application fees, mortgage insurance and the stamp duty. The value of these fees vary for every lender while the stamp duty fee value varies per state.