What does it mean to have a Home loan?
Well, in Australia it means living the proverbial dream. No matter the reason behind the purchase of your home, the feeling that comes with owning one is unparalleled, to say the least. Whether it’s a vacation home, your first home, or an investment purchase, there’s no greater feeling than the accomplishment one feels when it’s bought.
As mentioned, there are many reasons for taking out a mortgage. But what are the various types available and how does one go about applying for one?
Owning a home in Australia means going through all the legalities that come with loan applications. When taking out any loan, be it a small personal loan or a home loan, there are requirements that need to be met as well as financial checks that determine whether you qualify or not. There are a number of banks, your bank in fact, as well as other providers that will offer a mortgage to any Australian citizen wishing to purchase a property.
It’s no secret that every lender comes with their own set of criteria, rules and regulations, which is exactly the reason why researching the deals available is strongly advised. Interest rates will vary, terms will vary and even the level of service you receive is different from lender-to-lender. Referrals will be handy when it comes to the service aspect. Flexibility plays a fundamental role in the decision, so it’s best to ask the questions up front that you feel are your non-negotiables and to find out where they are flexible.
What types of Mortgage options are available to me?
The mortgage market is colossal! Don’t feel that you have to settle with just anyone because you truly can find the exact lender that will suit your needs and tailor a solution for you. The products available are all varied to suit specific types of individuals and scenarios, so don’t rush this part.
Certain products are designed to suit the first time buyer. Others are designed to specifically cater to professional buyers and act as business loans. A good example of this is the professional package or “pro-pack” that suits the needs of a much larger loan than the standard type. This package might come with banking services such as a credit card or feature discounted rates. As with first time buyers, investment buyers might also be exposed to tailored package offers.
Try a consultant if you’re unsure. Financial advice from a professional is never a bad idea and at least you have peace of mind that you’re making the right choice when all options have been considered. Home loans can also be used as personal loans which are very often used for debt consolidation.
Mortgage Interest Rates
When making decisions, the first should be whether you’re comfortable with a fixed rate or variable rate. A fixed rate guarantees an unchanging budget since the interest rate remains unchanged until the settlement of the mortgage. A variable rate is obviously the opposite, in that it varies with the rate of interest in the country. There is a third option even. First time home buyers in Australia can expect a hybrid offering in certain cases. This is a discounted variable rate that you can receive prior to it becoming the bank’s Standard Variable Rate. New customers love this option but should also be wary of the overall cost that could end up being paid as a result of the SVR potentially being higher than a fixed rate offering.
Your Mortgage – Banks vs brokers
99% of the time your very own bank will have a mortgage product available but there are many alternative lenders available and you can find many home loan products. This should be your first bet when it comes to considering a mortgage. All your details are already on the system, so the process will be quicker. They have access to all your financials, so credit checks don’t need to be done. So, it’s definitely a solid option. Don’t forget about other banks either, since they could have better mortgage products than yours.
Mortgage brokers have access to all kinds of lenders and will use these contacts to find the best deal. So, if you aren’t comfortable with your bank, remember that there are a large number of lenders both online and instore that can cater to your mortgage needs. Just ensure that they exercise responsible lending and are registered lenders, that way you can trust in the advice you are given.
How do I apply for a Home loan?
First and foremost, you need to need to decide whether a broker is for you or not. If you trust your researching skills and have a strong financial gut, you might want to do it on your own. Next, it’s best to ensure that you qualify with the FIRB and then choose a bank or lender that you feel resonates with you and your home loan needs. Once you have chosen the lender who will finance your home loan, it’s time to complete an online loan application and then furnishes them with all the paperwork required for approval.
Now for the exciting part! It’s time to find a property within your budget if you haven’t already and make an offer to the seller. A conveyancer will be necessary to assist you with all the legal stuff and the next step would be to pay your deposit to ensure that no other offers can be accepted by the seller from anyone else.
Finally, you’ll need to make a formal FIRB application for the approval of your purchase and complete the sale by taking ownership through transfers, payments and any additional tax.