Home Loan Guide

Mortgage-Property-FinanceTo obtain a home loan, you’ll need to be 18 years or older, and have the income to meet the loan repayments. Most lenders will lend you the money for a home whether it’s a flat, unit, house or land package. A number of different home loan options are available.

The maximum term available is 25 years for a Home Loan and 20 years for a Residential Land Loan.

Generally you have the option of paying your loan on a weekly, fortnightly or monthly basis depending on what suits your requirements. The more often you can make repayments, the lower the interest cost and the sooner your loan will be repaid.

If you hope to pay off your loan earlier, ensure that your loan allows for additional repayments, increasing the monthly repayment amount, or occasional lump sum repayments that may be made at any time. And that you can also pay out the loan in full at any time without incurring any penalties.

Fixed Rate Home Loans generally have charges for early repayment.

Repayments are determined by the amount borrowed, term of your loan and the interest rate. To help you, we’ve included an indicative repayment guide at the back of this book.

Most lenders will strongly recommend Mortgage Protection Insurance. With this insurance, your home loan is automatically paid off in the event of death or total and permanent disablement of the loan holder. You don’t have to worry about who would meet your home loan repayments if you could never work again through an unexpected serious illness, accident or fatality.

Choosing the Home Loan that’s right for you

istock_000006380615mediumThere are two basic types of home loans available, both offering you a range of repayment options.

Variable Rate Home Loan.

The interest rate is described as variable because it may change during the term of the loan depending on economic conditions.

You can usually make your repayments monthly, fortnightly or weekly.

The maximum term is 25 years. Interest is calculated on the daily outstanding balance of your loan and charged to your account monthly, so any additional or increased repayments will benefit you immediately. There are seldom extra costs for early repayment of the loan, other than Government/Bank discharge fees.

Fixed Rate Home Loan.

As the name implies, this home loan has a fixed rate of interest for a set term. Terms can vary from one to five years. After which, the loan can be renegotiated for another fixed rate period or transferred to a variable rate home loan.

Repayments also remain fixed for the negotiated term. You may be able to choose to repay interest only or principal and interest.

There may be additional costs if you opt for early repayment of the loan.

Other types of home loans include: Field Fixed, High Start, Low Start
How to apply for a Home Loan.

Call your bank or lending institution and make an appointment to discuss your needs. It is not essential to have a specific property or home in mind.

The lender will give you an indication of the amount you’ll be able to borrow.

Later, when you have found a home, simply ring to set up an appointment for the normal approval and application process. When you’re going to meet with your lender, you can speed up the process by being prepared with all the necessary information.

So remember to bring the following:
  • Current employment and income records : Take confirmation of details of your employment and income for the last three years (for example, Tax Returns, Group certificates. or a salary or wages slip).
  • List of assets : Note down your assets (money on deposit in the bank, cars, investments, real estate, stocks and bonds, collections and other assets) and their values.
  • List of liabilities : Write down what you owe (credit cards, personal or car loans, charge accounts). Credit card numbers can speed the process.
  • Your budget : Complete a budget showing all your income and all your expenses. Don’t forget to include living expenses and out of pocket expenses. It will help both you and your lender determine how much money is available to service the loan.

With this information, you can discuss your options and the kind of home loan and repayments that are right for you. Your home loan consultant can then issue you with a pre-approval or pre-qualified certificate which states how much they are prepared to lend you for a home.

With this certificate, you can start house-hunting with confidence. It also serves to put you ahead of the race when other would-be purchasers are interested in the same property as you are.