8 Questions about Your First Home Loan for First Home Buyers


March 10, 2020

When you’re buying your first home, there are a number of questions that can arise in the process. Whether you’ve got questions about the process, technical questions or questions about finances, we’ve got the answers. Here are the top 8 questions first home buyers ask about finances and our answers. Answer a few easy questions and find out if you qualify.

How Much Can I Borrow?

When it comes to working out how much you can borrow the first step is to draw up a budget. Write down your monthly income and then all your expenses. This will give you a good idea of how much you are already spending each month, and how much you have left over to potentially put towards a mortgage.

When doing a budget, you should always allow for a buffer for unexpected expenses and interest rate changes. To calculate your borrowing capacity, consider your income, expenses, any personal debt and the appropriate type of loan.

When considering a mortgage, you have to take into account the lending criteria, which can vary greatly between banks.

Common lending criteria can include:

  • Minimum deposit based of the loan to value ratio of the loan (LVR). LVR is the proportion of money you can borrow compared to the value of the property.
  • Employment status and current income.
  • Previous credit card limits and personal debts.
  • Your savings history or previous repayments history for any other loans (i.e. car loan).

If you meet their criteria, the lender will be able to advise you how much you’re able to borrow from them. Then, it is up to you to work out if this is manageable with your current income and lifestyle.

How Much Deposit Do I Need?

With as little as $1,500 deposit we are able to get you into your first home with WOW Homes.

What is an Interest Rate?

A home loan interest rate is the rate at which the bank charges you interest on the loan, such as 5% per annum. Some loans feature a reduced interest rate for an introductory period, which then reverts to the standard rate.

Fixed or variable?

A fixed rate home loan means your loan repayments will be charged at the same interest rate for however long the fixed rate period is. This rate is commonly for a period of between 1 and 5 years, but longer fixed rate terms do exist.

A variable home loan start with a lower interest rate and after an agreed time, the rate fluctuates according the market index, as set by the Reserve Bank. It means the interest rates move up or down with the market.

What is the First Home Owners Grant?

The first home owner grant (FHOG) is a government grant incentive to help first home buyers get into their new home sooner.

The FHOG is a one-off payment to assist home buyers to build a residential property for use as their principal place of residence.

The $10,000 is not expected to be repaid and is paid out in one lump sum.

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What is a Keystart Loan?

The Housing Authority offers a range a home ownership product through its lending provider, Keystart Home Loans. Keystart is an initiative of the State Government to assist Western Australians get into affordable housing.

These loan products help eligible people to buy their own homes through low deposit loans and shared equity schemes. Specific loan assistance is available for public housing tenants, sole parents, people living with a disability and Aboriginal borrowers.

Keystart loans are available in the Perth metro area for:

  • Singles earning up to $90,000
  • Couples earning up to $115,000
  • Families earning up to $135,000

Keystart loans are very attractive as you only require 2% deposit of the property price, of which only 1% needs to be genuine savings.

The other difference between a Keystart loan and other major banks is that they don’t require any mortgage insurance.

What is a Guarantor Home Loan?

A Guarantor Home loan is when another person (such as a parent) puts up a property they own (or have equity in) as security, allowing the borrower to borrow up to 107% of the purchase price of the home without needing a deposit.

This helps young people get into the property market sooner. Once you have paid off part of your loan or your property has increased in value, then you can apply to remove the guarantee.

What is Lenders Mortgage Insurance?

Lenders Mortgage Insurance help thousands of people each year to purchase their dream home, offering help to borrowers that don’t have a large deposit.

Depending on the lenders requirements, Lender Mortgage Insurance allows you to borrow up to 95% of the purchase price of your home, with a lower deposit than is usually required. Lenders Mortgage Insurance is added into your home loan.

Lenders Mortgage Insurance protects the lender if a borrower is unable to meet their mortgage repayments and the property has to be sold.

What is Stamp Duty?

Stamp duty is an amount of money that is charged on the purchase of land. The stamp duty is charged for legal documents to be stamped. The purchaser of the property is liable to pay the stamp duty. Depending on where you live and the value of your property these charges may differ.

As part of the WA first home buyer assistance, eligible first homebuyers who purchase new or existing dwellings under $430,000 are exempt of stamp duty. Discounted stamp duty for eligible first home buyers who purchase new or established homes between $430,001 & $530,000.

For more information about how you can get into your first home with a $1500 deposit, contact us today!

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