Get your head around home loans
Buying your own home is one of the most important financial
decisions you'll ever make. Here are some important things to
consider before applying for a home loan.
Before you start looking for a property to buy, you need to get
your finances in order. Remember to consider extra costs like stamp duty, legal fees, lenders' mortgage
insurance, land and water rates, home and contents insurance
and repairs when working out if you can afford a home loan.
Work out if you can afford a home loan.
Save as much as you can
Finding smart ways to manage your money will help you save for a
home. The bigger your deposit, the less you have to borrow, and
the more you will save in interest. Also, the bigger your deposit
is, the lower your loan to
value ratio (LVR) will be.
This is the amount of the loan divided by the purchase price (or
appraised value) of the property. If your LVR is over 80%, you will
be charged lenders' mortgage insurance, and some lenders will even
apply a higher interest rate to your loan. Saving a bigger deposit
will help you avoid these extra costs.
If you are buying your first home, you may be eligible for the
Australian Government's First Home Owner Grant.
Work out what repayments you can afford.
Choose your home loan
Once you've sorted out your budget, it's time to look for a
If you home loan provider is not an Authorised Deposit-taking
Institution (ADI) such as a bank, building society or credit union,
from 1 July 2013 the amount a credit provider is able to charge in
fees and charges is capped (that is, limited to a maximum amount)
at 48% annually (including all fees and charges).
Read the fine print
Don't get caught out by unexpected costs. Read the credit
contract carefully and check the interest rates and fees.
Check your credit provider
All credit providers and credit assistance providers (such as
brokers) must be licensed with ASIC or be an authorised
representative of someone who is licensed.
Search ASIC's Professional Registers to check
your credit provider or credit assistance provider is licensed or
you can phone ASIC's Infoline on 1300 300 630.
For more information see consumer credit
Stay on top
Keep your repayments up to date and seek help if you start
A home loan is a major financial decision, so
don't rush into anything. Shop around when choosing a home loan and
always review the contract closely before you sign up.
Last updated: 31 Mar 2017