Buying your first home is an exciting prospect that can also be a little daunting, but Finty has you covered. Find out everything you need to know about first time buyer loans and compare your options right here.
By Yvonne Taylor | Updated 18th March 2020
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It’s a home loan with features suited to someone dipping their toe in the property market for the first time. But, because there are many different types of first home buyers, the features that suit one first-time buyer may not suit another. So you need to decide what combination of the following features will work best for you.
Lenders are obliged by law to quote two interest rates for each loan they offer. The first rate quoted is the face value rate, the percentage interest rate that will be applied continuously to your remaining loan principal. The second rate, the comparison rate, has factored in the cost of the lender’s fees (such as an application fee, property valuation fee, loan establishment fee, monthly or annual account keeping fee, loan discharge fee) over the life of the loan, and expressed this as an equivalent monthly interest rate so that you can compare loans on a level playing field.
For example, both Lender A and Lender B may be offering an interest rate of 2.90%. But Lender A’s comparison rate is 2.91%, lower than Lender B’s comparison rate of 2.93%, because Lender B’s loan fees are much higher. A small difference in the interest rate percentage can add up to thousands of dollars of extra interest cost over the life of a loan.
There are five interest rate options:
The amount you will need as a deposit is not determined by the fact that you are a first time buyer. Instead, it depends on your income and creditworthiness (as reflected in your credit history and credit score) and the value of the property you are aiming to buy. The lender will usually request a valuation report on the property, and then work out a Loan to Value Ratio (LVR).
For example, if the valuation report says that the property is worth $750,000, and the lender decides, after reviewing your income and credit score, to offer an LVR of 80%, your maximum loan amount would be $600,000. If you were paying $750,000 for the property, you would need a deposit of $150,000 (20% of the value). But if you were paying, say, $765,000 for a property valued at $750,000, your deposit amount would be $165,000.
If your lender needs a 20% deposit (as calculated by the LVR) and you can’t come up with the required amount, you still have a few options.
Buying your first home can be quite daunting, and it’s easy to overlook some of the costs you will need to cover in addition to your loan. They can include:
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