Buying Your Home – Factors To Consider When Choosing From Different Types of Home Loans
The great Australian dream is to buy your own home. As exciting as it sounds, it’s no easy task. Making a decision of this size requires lots of research and investigation. In many ways, your first home purchase is the biggest decision you ever make so it can be extremely daunting, especially choosing from different types of home loans available to finance your first home mortgage loan.
First home buyers are facing a very steep learning curve when they first enter the property market. It’s confronting on many levels. You are balancing what you want with what you can afford. It’s the balance of proximity versus size versus funds!
To help you through this maze, here are a few important points worth considering…
Different Home Loan Types to Get The Best Home Loan Interest Rate
Not all home loans are created equal… and neither are the institutions who offer them. Every home loan style is designed for a purpose.
The business aims of the lenders themselves are based on commercial decisions. So finding all the relevant information, discovering who is providing the right home loan product for your type of property, then meeting their lending requirements is a task not easily done by a novice.
To say its confusing is an understatement. Even the jargon you need to learn is a big ask!
Here are some of the different types of home loans to give you an informed start.
“Principal and interest home loan” or “interest only mortgage” are the over arching kinds of loans available. These are broken down into application specific areas. Click on each link below to find out more information about each type of loan.
bridging home loans
debt consolidation loans
fixed rate home loans
variable rate home loans
investment property loans
line of credit home loans
offset home loans
refinancing home loans
All of these loans and others are applicable at times however each institution has its own flavour of these which is what muddies the water for you, the purchaser. Each type of home loan attracts a different interest rate and has features exclusive to the loan type and lender’s social values.
By now you’re probably starting to get a feel for the complexities of the finance industries world.
It’s like doing your tax. Even though you can do it yourself, your understanding of the current tax laws may have you compromising your claims or worse still… overstating them, risking fines and other unwanted drama. On the other hand, a tax accountant is well educated and versed on the current laws and allowances, giving you peace of mind and time to do more interesting things.
Just like using a tax accountant we suggest that despite your brand loyalty to your bank, a mortgage broker is the most effective way to wade through all this information.
The truth is, in my experience clients don’t care which lender/bank they borrow from. Logo and brand don’t really mean much when one lender charges you tens of thousands extra just because they are a major institution.
Our Mortgage Options has access to 32 different lenders, all of whom have multiple variations of the above loans.
Why not get the right fit for you by having us sort your requirements… leaving you to use your time better looking at potential properties within your chosen area and price bracket?
Do You Need Lenders Mortgage Insurance?
Sometimes to qualify for a home loan, a lender will ask you to take out Lenders Mortgage Insurance. This is because in their estimation your deposit is not enough for them to be comfortable about taking the risk of financing your property purchase.
The normal threshold for this request is when you have less than 20% of the property value for your deposit, or if the type of finance you seek is nonconforming; in other words outside their normal lending rules. In reality, the financier is simply looking to protect their money in case you default on the loan.
This kind of insurance is purchased by the borrower and is a one-off-fee. The price is decided by the type of loan, the amount of the loan, the value of the property and the stamp duty.
If the property has to be sold due to a default and the proceeds do not repay the full amount of the loan to the lender, the insurance policy will cover the difference. Potentially the insurer could take steps to recover the difference from the borrower.
When you purchase a property, your state government requires you to pay the stamp duty. It is directly proportional to the value of the property (purchase price). The amount varies from state to state, and also depends on whether it’s your first home or not.
Our Mortgage Options can help you with the calculation of this value.
What are Deposit Bonds?
Sometimes there are circumstances where a buyer does not have the ready cash to be able to pay the minimum deposit which the vendor requires. When this happens, both the vendor and the buyer miss out on the opportunity.
In this situation Deposit Bonds can be helpful.
A Deposit Bond is an insurance policy which makes sure that if the sale doesn’t go ahead, the deposit will still be paid to the vendor. You see, under normal circumstances the buyer loses the deposit monies when a sale doesn’t go ahead, so the Deposit Bond used in a “no money down” situation protects the interests of the seller.
The Deposit Bond is a document which binds the buyer to pay the agreed deposit amount to the seller in the event of the sale not going ahead.
No money actually changes hands initially but the purchase price (including the deposit) is paid in full on settlement. Once the full purchase price is paid, the Deposit Bond lapses and is no longer binding.
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