If you’re feeling ready to get out of that rental property and step proudly into home ownership, then one of the most important aspects to consider will be how you’re going to finance your first home purchase. A little preparation and research can save you significantly in both funds and frustration! Before you find your perfect home for sale, read through these tips on financing options.
Buying with cash
It’s very rare that a first home buyer would pay cash for their home, but if you are in this position then you could save yourself money over time without having to pay interest on a loan. Most first time home buyers will instead finance their property purchase through a mortgage, or home loan.
Buying through a home loan
Step one of obtaining finance is to look at the big picture and the long term. You may wish to speak with your financial advisor or accountant early in the process, as this can give you a good idea of what you’ll be able to comfortably afford based on your income and financial obligations like personal finance loans.
Just starting out saving for a deposit? There are home loan calculators available online that can give you a quick idea of how much to ideally save and how much you might be able to borrow.
It can pay to save a decent deposit before you start your search for your new home. Remember that a deposit of at least 20% of the loan amount will mean that you can avoid paying LMI, or Lender’s Mortgage Insurance. This could potentially save you thousands!
It can be worthwhile obtaining pre-finance approval before you begin your house hunt, as this can give you a set price range to search within and a clear idea of what you can pay for a home.
Pre-finance approval is an indication of how much you’re likely to be able to borrow, based on your current financial situation.
Unconditional approval is official approval that is given after you fill out a formal, more detailed loan application. It means that you can go ahead with your property purchase!
Home loan comparison
Your options for home loan comparison and application include:
- Applying directly with a bank or lender and asking for their best interest rate, fees and terms. Principle and interest loans are the most common loan for first home buyers, where you pay off both the borrowed amount and interest together in your regular mortgage payments.
- Using a mortgage broker, such as Aussie Home Loans, who can identify competitive interest rates, fees and terms. This service is generally free to you because the lender pays a commission directly to the broker.
Don’t forget you may also be able to take advantage of the First Home Owners’ Grant, which could save you up to $20,000 on the price of your home. The team at Plantation Palms would be happy to talk you through any government grants that you may be eligible for and answer any questions you may have. With a little knowledge and some preparation, financing your first home purchase can be a straightforward and stress-free process!