About to get my first home loan. Any advice would be great.

rushil01 on 16/09/2015 - 15:05

Hey guys,

So I'm in my early/mid twenties living in Brisbane and am about to buy my first house. To get things rolling I am going to get pre-approved from the bank and figure out what my borrowing power actually is. I have around $75k sitting in my savings account which I can use for a deposit/stamp-duty, ect.

Basically I would love some guidance on what things I should be looking for when I'm sussing out my home loan and any other things I need to consider. What are some of the key things I should ask the bank?

It's a little bit overwhelming for a first timer…

Financial

Comments

  • cypher67 on 16/09/2015 - 15:07
    +3

    Borrow what you can afford to repay, they will most likely allow you to borrow twice that amount.

  • inherentchoice on 16/09/2015 - 15:10

    If you previously had a ME Bank FHSA then you can get $2k cashback on your loan.

  • dasher86 on 16/09/2015 - 15:13
    +7

    talk to a mortgage broker. =)

    • lenlynn on 16/09/2015 - 18:16

      On this note, check out reviews of brokers in your area to find a good one. We drove about 45min out from where we lived to our broker (good reviews online) and she was worth it.

  • lupiter on 16/09/2015 - 15:33
    +5

    Work out what you are happy to pay each week/month and work out the size of the loan from that. The bank calculators often work on your whole income and don't allow for things like buying food or 100 new very good deals on smartphones. The calculators also sometimes pin the interest at the current rate, so make sure you give yourself plenty of room for the interest rate to go up (at least double).

    Lender's Mortgage Insurance is you paying for insurance for the bank, not you. Get as close to the 20% deposit as you can to avoid paying LMI, don't do less than 10%.

    Don't get suckered in by "premium packs". It's just bank fees with a fancy name.

    Be prepared to walk out on a pushy loan salesperson. Most get a commission so no matter what they say they aren't "there for you".

    • YTW on 16/09/2015 - 15:59

      I wouldn't disregard 'premium packs' altogether without looking at what they offer and if it would work out cheaper for you overall.

      We pay $400 a year. Compared to no having it (on the same loan), we save around $2000 in interest and $120 in insurance premiums. There are other 'benefits' too that we don't bother taking advantage of at the moment because they aren't of great advantage to us, but other people may find value in them depending on their circumstances.

      It's just another way of charging fees, but it works out cheaper for us with our home loan to pay for the 'premium' package.

      • lupiter on 16/09/2015 - 16:12

        That's true, some "premium packs" offer say, 0.1% less interest + no fee credit card for $300 a year. Depending on your loan value that might be worth it for the interest reduction, but don't get conned in by the credit card.

        The "premium pack" might also let you make extra repayments without hitting extra fees. Yes, banks will charge you for paying off the loan early.

        But as always: read the fine print.

        • Davros on 17/09/2015 - 08:37

          0.1%? I am getting closer to a full 1% off of mine.

  • tomleonhart on 16/09/2015 - 16:04

    Broker here.

    Dont want to sound like I drum up business but have you talked to a broker or you have gone straight to a bank?

    Broker will find the cheapest suitable loan for you with a lot of different lenders where as a bank will…. not do that :) That's my tip !

    • lupiter on 16/09/2015 - 16:08

      A good broker will. Sadly, there are some shady brokers.

      A good broker will also call the bank all morning to make sure they turn up to settlement. <= worth any fee not to lose deposit!!

      • tomleonhart on 16/09/2015 - 16:12

        There are shady people of all professions!

        • lupiter on 16/09/2015 - 16:14

          Indeed! But it's worth being extra cautious with what is probably the biggest spend of your life. FWIW my broker was very nice.

        • tomleonhart on 16/09/2015 - 16:16

          @lupiter: Yeah. Like Aussie John said "when it comes to the biggest purchase of your life, why do you only ask your bank for their opinions" :P

  • YTW on 16/09/2015 - 16:09

    Don't just go for the cheapest loan. Work out what you want/need then see who offers it for the best value.

    We find having an offset account very handy. Doesn't suit everyone though.

    Check what their conditions are for extra/early repayments, lump sum repayments etc.

    Find out if you have the ability to fix part or all of your loan. You may find that handy at some point.

    Try and avoid mortgage insurance. It does nothing for you. You are paying the bank's insurance premium for them.

    I use Canstar as a starting point for comparison of things like this.

  • tomleonhart on 16/09/2015 - 16:13

    Your borrowing capacity varies depending on which banks you're going with…

  • TailsK on 16/09/2015 - 16:39

    Work out a reasonable budget to see what repayments you're comfortable with. When you look at loans, also take note of the packages on offer. The fees for these are usually a few hundred dollars annually, but often they will reduce your interest rate, and give you other benefits (such a decent credit card that has a rewards program, free travel insurance and stuff like that).

    Also suggest that you look for a loan that offers a 100% offset account (not redraw). It's better than earning interest in your savings and will help you pay your loan off faster (especially if you're good at saving).

  • redvaldez on 16/09/2015 - 17:24
    +1

    If you're a first home buyer in Queensland, you may not have to pay stamp duty - more info here. There's also the Great Start Grant if the property you are purchasing has never been lived in before - more info here.

    I agree with cypher67's comment - just because your bank will loan you up to a certain amount doesn't necessarily mean that it's a good idea. I was pre-approved for an amount that would have resulted in repayments that were about 2/3rd my takehome wage - and that's with interest rates at their current record lows. Obviously I didn't borrow anywhere near that amount.

    For what it's worth, I'm a Queenslander and bought my first home earlier in the year. I went with Bank of Queensland. The interest rate was lower about 0.2-0.3% cheaper than the majors, I get an offset plus redraw, plus my day to day accounts and credit card are no charge. Don't regret my decision. Having said that my LVR was 90% and I bought a relatively cheap property, which excluded some of the better deals that the major banks were offering.

  • jellykingdom on 16/09/2015 - 17:49

    Again, its a salary+savings thing, but I don't recommend an offset for first home

    Unless things have changed dramatically, they were more expensive overall. When I first got my home loan, they spruiked the benefits, "oh look your mortgage goes down and your savings go up, blah blah blah". But they don't really mention that the extra interest % for the offest accounts will offset (pardon the pun) the extra savings. I actually worked out that on my salary, it was more expensive for me to have an offset account because it was going to be an extra 0.5% interest or so.

    So do a rough calculation on excel and check that, based on how much you really think you will put into savings each week/month

    I would recommend a bog-standard home loan so that you get a good feel for the whole thing, then consider refinancing or a new loan later on down the track

    Also, you should try to get free credit card and other pluses. The cost of my free credit card is actually equal to around 0.3% of the loan, which is something that people tend to forget!

    • dasher86 on 16/09/2015 - 18:33

      Plenty of loans with free offsets these days.
      You can always apply for a free credit card with another institution instead.

  • Ughhh on 16/09/2015 - 17:54

    I'm on a similar boat, except Im in SA and have a little more savings. Is the ING direct orange advantage deal the best for first home owners or is there something better?

    Can anyone recommend a good mortgage broker in Adelaide?

  • SlickMick on 17/09/2015 - 08:31

    Are you a responsible saver? If so, an offset account is great.
    The problem is, some people see money in their account and find the need to spend it. In that case you're better off with a traditional loan.

    loans.com.au have both types at really good rates, though I did notice there are some cheaper loans out now. I'm about to refinance from Ubank as they are no longer competitive.

  • Waldo000000 on 17/09/2015 - 08:52

    Firstly, do NOT ask a bank to tell you what you can afford. Instead, use a simple compound interest calculation and plug in the following:

    1. the minimum amount of your monthly budget in $ that you'll be able to spend on repayments, rates and maintenance from day one. If that amount might reduce in the future (e.g add a stay-at-home spouse and/or child[ren]), use whatever value is lower.

    2. how many years you want to have a mortgage for (generally 25 to 30 years), and

    3. the maximum expected interest rate over that time frame (generally, double the current interest rate, say, 10% to be safe)

    Here's one such calculator (just take note of "Monthly repayments", "Deposit amount" and "You may afford to borrow"): http://www.mortgagechoice.com.au/home-loans/calculators/what…

    Go find a house you like. If you break the budget calculated above, you are taking a risk.

    Secondly, use mozo.com.au to choose a home loan provider. Most likely, you'll do well if you just choose the one with the lowest comparison interest rate. We went with Loans.com.au (3.98% interest rate, with offset account), and are very happy with them.

    Word of warning from a recent first home buyer - be prepared for an emotional roller-coaster, and be patient with what will seem like an endless procession of paperwork - it does end eventually!

    Good luck 😊

  • plowry1977 on 17/09/2015 - 09:11

    Dont stretch yourself, get a mortgage for what you can afford, then overpay when you can.
    Use online calculators available on bank websites to see how much an extra $100 will save you in interest over course of loan. We took a 30 year mortgage, 5 years in and we look to pay off in 12 years, saving about $300k in interest.

    We have an offset account which works well. If you tend to have a sizable current account balance (>$5k) then consider offset option. Also if you have a credit card, load everything up on that, then pay off full balance on very last day possible, thus leaving money in your offset account as long as possible to save interest.

    Re. premium pack - worth considering. The Westpac one works out for us, as we get 0.7% extra off interest rate, so we do save over $395 fee each year, plus get free amex platinum credit cards and insurance discounts, no fees for redraw etc. But Westpac rates not that competitive, so need to see if works for your situation.
    seems like you doing well saving up sizeable deposit, so you you got yourself in good starting position. good luck.

  • ciab on 17/09/2015 - 15:18

    This offer is still on https://www.ozbargain.com.au/node/195962 just click the suncorp link and then the special offers tab

Login or Join to leave a comment
Login Join