New Home

How much can you afford?

The first thing we will do is work out your borrowing potential.

You may have a dream home in mind but first you need to know if you can afford it. There are many factors that will influence your decision around what to buy and where – proximity to work and family and your stage of life are just a few – but the single biggest decider is nearly always what you can afford. It’s really a case of looking at the big picture and working your way back from there. Consider your household income and what you realistically can afford in loan repayments, taking into account all of your expenses (even coffees and lunches). As a guide a mortgage calculator can be a great place to start, but it won’t take into account all of your personal circumstances or eligibility for a loan. Talking to us will give you a much more accurate idea of what you can afford. We can look to obtain pre approval from a lender so you can put an offer on a home when you find the one you like. Of course, even with a pre-approval a subject to finance clause is an important protection.

Understanding the different home loan types

  • There’s a lot more to loans than interest rates and fees.
  • Obviously a low rate is important but it’s not everything. There are different sorts of loans and features that will make managing your mortgage easier. We can take the time to teach and advise you on the fundamentals you need to know to make an informed decision.
To begin with, it’s important to know the main types of loans:
  • Variable – The interest rates go up and down depending on factors such as the official cash rate, market conditions and each lender’s decisioning. When the rate goes down, so do your minimum repayments. But when the rate goes up, your payments will too.
  • Fixed – The interest rate can be fixed for one to five years. Even if rates change, your repayments stay the same. This helps manage your household budget by knowing exactly what you’ll have to pay. Of course you won’t benefit if interest rates drop and there may be significant break costs to change the loan before the end of the fixed term.
  • Split Rate – One part is variable, the other is fixed. This lets you enjoy the benefits of an interest rate drop but also protects you from being affected fully if they rise.
  • Interest Only -You only pay the interest on your loan but not the principal loan amount. Your repayments are less but you still have the same level of debt at the end of the interest only period. However, an interest only loan will usually cost more over the term of the loan as you won’t start paying off the principal until after the end of the interest only period.
  • Line of Credit – You can pay into and withdraw from this account as long as you keep up with the required repayments. You can have your income paid into this account to help pay off the mortgage sooner but interest rates are usually slightly higher.
  • Honeymoon Periods – Designed especially for first homebuyers, you can enjoy a lower interest rate for the first six to 12 months, and then the rate returns to the standard variable rate.
  • Low Doc – These are popular with self-employed people because they need less documentation or proof of income. However, they usually have a higher rate of interest or need a larger deposit, or both.
  • Borrowing from the bank of mum and dad – With property affordability getting increasingly tricky for some, many first homebuyers are reaching out to their families for financial assistance to help increase their borrowing power.
    Partnering up can reduce the financial burden and may mean you can afford a better quality property with greater growth potential than if you bought solo. But it’s not a move you should make lightly. Even if you decide to buy your first property with family, make sure you seek legal advice and ensure each party understands their financial and legal obligations. You don’t want a financial transaction or financial partnership to come between you and your family. You should talk about what would happen if one of you was unable to cover their share of the mortgage and how you might reduce this risk. It’s also important to contemplate scenarios such as one of you wanting to sell or move out sooner than planned. If you are considering this then you may find it helpful to speak to a financial planner and lawyer. There are benefits to be gained but as with every significant financial decision you make, it is critical to weigh up the risks at the same time.

The first home owners grant and other incentives.

The First Home Owners Grant and other various grants and stamp duty concessions may be available to give first homebuyers a leg up.

The grants usually apply to apartments and houses up to a certain value. These thresholds can vary depending on the type of dwelling and the state or territory in which the property is located. The savings can be significant. So it’s certainly worth exploring. Visit www.firsthome.gov.au to find out what’s on offer under the FHOG scheme in your market. It is also worth checking if your state or territory offers stamp duty exemptions or concessions for first homebuyers.

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