Home Loans

You can apply for a home loan with any number of financial institutions but make sure you do your research on where to get the best package and rate available.  Alternatively you could use the services of a mortgage broker to help you explore your home loan options.

 Should I rent or buy?

One of the most common questions young people considering buying their first home ask is whether they should rent or buy?  It is a complex question and there is not one correct answer. The best you can do is consider all your options and make a decision that is right for you now.  

To help you get started, here are a few links to some interesting articles:

Barefoot Investor - short article on the rent v's buy argument

Finance NineMSN - a look at the pros and cons

Money Morning - highly rated and excellent article on the rent v's buy topic

Department of Communities - a 3 page pdf summary of important considerations

Your Mortgage - a calculator to crunch the numbers

Yahoo Real Esate - a slightly more detailed calculator

 How do I apply for a home loan?

The following are steps to follow to apply for a homeloan:

Step 1

Decide on your lender

Rsearch home loan providers and compare rates and all other fees

Step 2

Select your loan type

 

Weigh up the alternatives, consider fixed, variable and split loans.  Work out what will best suit your circumstances now and in the future.

For example, a fixed loan may be suitable if interest rates are low and you need the certainty of a payment amount for a period of time.  Variable may be better if you intend to pay more than the required amount to pay off your home loan early.

Step 3

Understand the fees

Ensure you clarify the potential fees and charges there may be for your type of loan before you sign any documents.  These might include:

  • loan establishment fees
  • stamp duty
  • registration fees
  • monthly administration fees
  • early payout fees

Step 4

Check your credit history

 

Ask yourself whether you have a sound credit rating and credit history. Your bank or credit union will more than likely be doing a credit history check on you.  Have you established a history of making repayments and paying down debt?  Have you a proven history of saving if you have never had a loan before?

Step 5

 

Complete an application form

Often this is done with the help of the lender or a mortgage broker if you choose to use one.  Make sure the information you provide is financially accurate.  Your loan may become conditionally approved (pending a satisfactory property valuation) or finally approved.

Step 6

 

Check your loan documentation

Ensure that you check all documentation thoroughly.  If you don't understand anything make sure you ask for clarification from your lender or solicitor.  Once you are sure you are happy with the conditions of the loan, you can sign the documentation and return them to the lender.

Step 7

Check loan conditions are satisfied

Liaise with your solicitor to ensure that all the conditions of the loan approval are satisfied so that your purchase can settle on time.

 What are some of the costs I need to consider?

You should be clear on all the potential costs that you may incur when you purchase a home and take on a home loan. These costs can include:

  • Stamp Duty - a State Government tax that you are required to pay upon the transfer of a property.  Costs vary from state to state and are usually based on the purchase price of your property.
  • Bank Charges - these can include loan establishment fees, ongoing monthly fees, loan stamp duty and registration fees.
  • Lenders Mortgage Insurance - if you have not saved 20% of the value of the property as a deposit, they you may be forced to take out Lenders Mortgage Insurance.  This type of insurance protects the lender agains loss if you can't repay the loan and covers the difference between what is owed on the loan and what the property can be sold for.
  • Inspections - It is always wise to check that the property you are purchasing is structurally sound and there is no existing or potential pest damnage by getting Buliding and Pest inspections done before you commit to purchasing.
  • Solicitors Fees - you should always use a solicitor or a conveyancer to review any contracts to puchase a property.  They will also carry out any relevant searches that may highlight other issues or areas to investigate further e.g. an easement on a property.
  • Insurance - the purchaser is liable for the property upon signing the contract, so building insurance covering the structure and fixtures of the property may need to be taken out very early in the purchasing process.