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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.

Borrowing Power Calculator

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.

 
See All Available First Home Buyer Schemes

WHAT OTHER COSTS ARE INVOLVED WHEN PURCHASING A PROPERTY?

There are a number of extra, often seemingly hidden costs buyers need to be aware of:

  • Stamp duty of up to 8%
  • Pest inspection reports
  • Building inspection reports
  • Strata inspection reports
  • Conveyancing
  • Mortgage registration
  • Transfer fees
  • Settlement fees
  • Home loan applicaiton fees
  • Home loan legal fees
  • Valulation Fees
  • Lender’s mortgage insurance (LMI)
Watch The Loan Process

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.

 
Watch The Loan Process

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).

 
Borrowing Power Calculator

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.

Learn About Guarantor Loans Here

WHAT IS PRE-APPROVAL?

A home loan pre-approval (or conditional approval) is an unofficial assessment of your borrowing capacity – a lender tells you whether it would be likely to give you a loan, and for how much. It’s a good idea to get a pre-approval before you start looking for a home – that way, you know how much you can spend.

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.

Mortgage Repayments Calculator

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. 

Fixed vs Variable

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.
Structure Your Loan

WHAT IS AN OFFSET ACCOUNT?

An offset account is a separate transaction account that’s linked to your home loan. You can use it as your everyday bank account, with easy access to your funds and the ability to make deposits and withdrawals whenever you want to. It also gives you the benefit of potentially reducing interest payable on your home loan.

Any money you have in your account is ‘offset‘ against the balance of your home loan, meaning you only pay interest on your home loan balance minus the balance of your offset account. As interest is calculated daily and charged monthly, the more money you keep in your offset, the less you pay in interest. But that also means that as your balance rises and falls, so does the amount it can reduce the interest on your home loan.

WHAT IS A REDRAW ACCOUNT?

A redraw facilities gives you the ability to make extra repayments in addition to your minimum fortnightly or monthly home loan repayment. These additional funds can be taken out (or redrawn) if you need them for renovations or to cover an unexpected expense.

The money in your redraw facility counts against the balance of your loan loan, which lessens the amount of interest you pay. It’s effectively a pool of funds comprising your extra repayments that sits in your home loan account on top of the balance. Keep in mind that these extra funds kept on your loan balance will reduce with regular repayments ovver time.

Learn About Offset Accounts & Redraw Here

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.

Learn About Lenders Mortgage Insurance Here

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.

 

MORTGAGE BROKER v BANK

There are several benefits of using a mortgage broker over going directly to a bank:

  • Access to a range of lenders: Mortgage brokers have relationships with numerous banks, credit unions, and non-bank lenders, which means they can shop around on your behalf to find the best deal that suits your specific financial situation and requirements.
  • Expertise and guidance: Mortgage brokers can guide borrowers through complex loan terms, interest rates, and government regulations. Their insights help borrowers make well-informed decisions and understand the intricacies of mortgage options.
  • Time and convenience: Engaging a mortgage broker can save borrowers a substantial amount of time and effort. Instead of approaching multiple banks individually, a broker streamlines the process by presenting the most suitable options, thereby expediting the loan application process.
  • Negotiation: Mortgage brokers can negotiate with lenders on your behalf, potentially securing better interest rates and terms than an individual might be able to on their own.

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    First Home Buyers FAQ