Buying a home is one of the biggest financial decisions you'll ever make. Understanding your home loan options is the first step. This guide explains the basics, from interest rates to deposits, so you can search for your property with confidence.
As your mortgage broker, we're here to guide you through every stage, from getting pre-approval to settlement day.
A home loan (or mortgage) is a long term loan from a lender (like a bank) used to purchase a property. The loan is 'secured' against the property, which means the lender can sell the property if you fail to make your repayments.
You'll have to choose between two main rate types:
The interest rate can move up or down over the life of the loan, following changes in the market (like RBA cash rate moves). Your repayments may change.
You 'lock in' a specific interest rate for a set period (usually 1 to 5 years). Your repayments are predictable and won't change, but you may have less flexibility.
A combination of both. You can fix part of your loan and leave the rest variable, giving you a mix of certainty and flexibility.
While you can buy with as little as a 5% deposit, a 20% deposit is the ideal goal. This allows you to avoid paying Lenders Mortgage Insurance (LMI).
Loan with 20% Deposit: LVR (Loan to Value Ratio) = 80%. No LMI required.
Loan with 10% Deposit: LVR = 90%. LMI is payable.
Don't forget to budget for other costs, including Stamp Duty, legal fees, and building inspections.
LMI is a one off insurance premium you pay if you borrow more than 80% of the property's value. It protects the lender, not you, in case you default on the loan. We can help you calculate the LMI cost or explore options to avoid it, such as government schemes or Guarantor Loans.
Let's talk about your property goals. Book a free, no-obligation chat to see how we can help.
Disclaimer: All information provided is general in nature and does not constitute personal financial advice. Your full financial situation would need to be assessed. Lending criteria, fees, and charges apply. Please view our Privacy Policy and Credit Guide.