First Home Buyers FAQ

HOW MUCH MONEY CAN I BORROW?

This is a great place to start! The amount you can borrow will be based on your unique set of financial circumstances.
Your income, assets, liabilities and credit history can all affect your borrowing power and each lender will have a different set of criteria.

Our home loan calculator can help give you an idea of how much you can borrow.

WHAT GOVERNMENT GRANTS OR SCHEMES ARE AVAILABLE FOR FIRST HOME BUYERS

There are several government grants and schemes available to assist first home buyers with getting into the property market sooner. Below shows the official schemes on offer and eligibility criteria.

WHAT DOES THE HOME LOAN PROCESS LOOK LIKE?

As a first home buyer, the journey to becoming a property owner can be daunting. See our video explaining the loan process below.

WHAT IS THE MINIMUM DEPOSIT REQUIRED TO BUY A HOME

Traditionally 20% of the property purchase price is required as a deposit, however it depends on the type of home loan, strategy and lender you select. Some lenders offer options for first home buyers with deposits as low as 5% – 10% plus lenders mortgage insurance (LMI).

HOW IS INTEREST CALCULATED?

This is determined by your lender and loan contract. Typically, the interest cost of your loan is calculated daily on the outstanding balance. For example: daily interest on a $600,000 loan with a standard variable rate of 7% p.a. is: ($600,000 x 7%) / 365 days = $115.07

Most loan types require the actual loan amount (principal) to also be paid back. This amount will be added on top of the interest payment.

The find out what your repayments will be use the Shore Financial calculator below.

FIXED RATE VS VARIABLE RATE – WHICH IS BETTER?

Each has it’s advantages. Fixed rate loans offer stability in repayments, while variable rate loans fluctuate based on market conditions. Consider your financial goals and strategy with one of our experts before deciding which is right for you. Our video below will explain the difference between fixed and variable interest rates.

WHAT’S THE DIFFERENCE BETWEEN ‘PRINCIPAL & INTEREST’ AND ‘INTEREST ONLY’ REPAYMENTS?

Principal and Interest simply means that you pay a portion of the loan balance in additional to the interest charged over the agreed period. You essentially pay back the loan over the term of the mortgage.

Interest only is when you’re paying the interest on the balance with no principal over an agreed period. Our video below runs through how to structure your loan.

WHAT IS AN OFFSET ACCOUNT?

An offset account is a transaction account linked to your mortgage, where cash parked in this account ‘offsets’ (reduce) the amount of interest payable on your mortgage. This is a popular strategy and can help you pay off your home loan faster.

WHAT IS REDRAW?

Some lenders allow you to make additional payments on your mortgage, over and above your monthly repayments. This mean that there may be additional money that you can redraw from your mortgage.

Each lender is different and many loan products differ, but your lender may allow you to withdraw the extra funds.

WHAT IS LENDERS MORTGAGE INSURANCE (LMI)?

Lenders Mortgage Insurance is a fee you pay to the lender if you borrow more than 80% of the value of your property. It’s the insurance the lender takes out for the mortgage to protect itself, but it also allows the borrower to get into the market with a smaller deposit. The larger the deposit you have, the less your lenders mortgage insurance will be. Depending on the loan type and amount, some lenders will allow you to add the cost of this insurance onto the loan so that you don’t have to pay for it upfront.

CAN I PURCHASE A PROPERTY WITHOUT A DEPOSIT?

The answer is yes, if you have a guarantor (often a family member) who provides security (like their property) to support another person’s home loan. This enables borrowers, especially those with smaller deposits, to borrow 100% of the property price plus costs and avoid paying lenders mortgage insurance. However, being a guarantor means taking on significant responsibility as they become liable for the loan if the borrower defaults.

HOW CAN I IMPROVE MY CHANCES OF LOAN APPROVAL?

Maintain a good credit history, reduce existing debt, save for a larger deposit and ensure stable employment. A Shore Financial mortgage broker can also help you find lenders suited to your financial situation.

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