Finally, you’ve found the place where everything you need to know is in one place… That’s MADD! You’ll learn how much deposit you need, how the banks work out your lending capacity, what all the banks mystery jargon stands for like LMI, LVR, Guarantor & FHLDS… Geez… Why do they have so many abbreviations anyway?
But hey, we understand that reading may not be your preferred way of learning. No worries! Simply get in touch with your trusted Madd Broker, and we’ll gladly arrange a FREE First Home Buyer Meeting. In this personalised session, we’ll guide you through everything you need to know when purchasing your first house. Rest assured, we’ll break down complex concepts into understandable language, ensuring you feel confident and well-informed throughout the process.
When it comes to how to save for a house deposit, the good news is that you can have your smashed avo and eat it too – so where do you start? It’s no secret that it’s getting harder and harder to get into your first home. The government does want more Aussies to actively participate in the nation’s property market, and particularly younger Australians. While the grants, interest rate cuts and monetary incentives are great, the primary issue remains the same – how do you save all that money for a house deposit?
The reality is that in order to save meticulously for a home deposit, not everybody is in the position to move back in with their parents. Thankfully, there are plenty of other methods available when it comes to tweaking your lifestyle to achieve your financial goals.
Look for ways to reduce your discretionary spending. Cut back on non-essential items and activities, such as eating out, entertainment, or subscription services. Consider negotiating better deals for utilities, insurance, or internet services to lower your monthly expenses.
Consolidating your debts is one of the most straightforward ways to get on top of existing loans or debts, and ultimately lowering your interest rates. One credit card stashed for emergencies isn’t going to make or break your chances of a loan approval, but a large car loan or multiple miscellaneous debts might.
While cutting down on your living expenses sometimes doesn’t leave much wriggle room for potential savings, increasing your income is an alternative that doesn’t necessarily suck all the fun out of your lifestyle. If you have a creative pursuit that can be turned into a side hustle – go for it. Explore the opportunities around you that could boost your income.
Discover the power of knowledge in the realm of real estate by reserving a spot at one of Madd Loans’ complimentary First Homebuyer Workshops. Conducted entirely online through engaging webinars, George and the dedicated team at Madd Loans guide participants through the intricacies of securing their first home loan. This digital platform offers convenience, allowing you to work around your employment and other commitments.
Since 2012, Madd Loans has been tirelessly assisting over 3000 Australians in exploring various finance options to transform their dreams into reality. Their reputation is built on referrals, and George takes immense pride in making the mortgage process enjoyable and educational, as evidenced by his numerous awards.
In these complimentary online workshops, George generously shares his valuable insights, tips, and even personal mistakes, ensuring you obtain pre-approval on your first attempt. Participants gain invaluable tools to accelerate their journey toward owning their dream home. It’s important to note that attendees face no obligation to follow the Madd Loans team’s process; the aim is simply to empower buyers with Madd’s financial knowledge, empowering them throughout their first home buying journey.
If you’re interested in learning more about saving for a house deposit and the essential aspects of purchasing your initial property, reach out to the Madd Loans team today to secure your place at the next free First Homebuyer Workshop.
Apart from significantly cutting down on the time it takes to save for a home loan deposit, the major attraction of guarantor home loans is their ability to help an applicant avoid paying Lenders Mortgage Insurance. This is because the guarantor is essentially the ‘backer’ of the buyer, and is vouching for their ability to repay the loan.
Depending on the lending institute, it may be possible to borrow over 100% of the purchase price of the property to cover added fees as well. In addition, the guarantor doesn’t have to commit to the full amount of the loan – in fact, most only secure part of the loan (called a Limited Guarantee).
Many guarantors only ‘cover’ the buyer until they have paid back the 20% deposit minimum, or until their property value grows so that the loan balance is under 80% of the property value, after which time their responsibility ceases.
Lending institutes will look over the finances of a guarantor, with the main criteria being having equity in their existing property.
The downside of guarantor home loans is that in the event that the primary buyer should default on the mortgage, the guarantor may be responsible for paying back the guarantor portion in some rare circumstances. As such, opting to become a guarantor for someone you love isn’t a responsibility that should be taken lightly, as the guarantor is arguably the one that stands to lose the most financially.
For first home buyers that meet the eligibility criteria, the First Home Owners grant can be used to build a brand new home (house, unit, apartment) that has never been occupied, purchase a substantially renovated home that has had most (or all) of the structural or non-structural components are removed or replaced, or to pay for the construction of a granny flat or kit home on an existing property, subject to local council approvals.
If your contract is dated 1 July 2018 or later, Queenslanders can access the $15,000 First Home Owner Grant to buy or build their new house, unit or townhouse, but it must be valued at less than $750,000. In addition, it’s also worth noting that the funds are paid per new home, and not to each of the applicants for the same home.
While the funds can be used as a deposit for a home loan, it’s rare to find a property at a low enough price point where the grant is enough to fully cover the required 20%. In addition, there are a few rules to be eligible for the First Home Owner Grant in Queensland, such as the fact that it’s only open to Australian citizens and permanent residents, must be genuine first home buyers, and are aged eighteen or over.
Before relying on the First Home Owner Grant as an entry point into the property market, it’s important to remember the delays and costs that the local construction industry is currently facing, so be sure to factor this into your decision.
Under the First Home Guarantee, eligible first home buyers could instead purchase or build a new home with a deposit of as little as 5% deposit, with the government actually guaranteeing the remaining amount – eliminating a first home buyer’s exposure to paying Lenders Mortgage Insurance.
Although initially controversial, the yet to be released Help To Buy scheme is targeted towards low to middle income earners, and is essentially a shared equity scheme where the Federal Government contributes 40% for new builds, and 30% for existing properties – meaning that the Government will have a financial stake in your home.
With over one million sole parent families in Australia, this figure not only represents roughly 15% of all households, but almost 80% of these families are disproportionately being raised by single mothers.
With a P&I loan, your regular repayments consist of both the principal amount borrowed and the interest charged on the loan. Each repayment you make contributes towards reducing the outstanding loan balance (principal) and covers the interest cost. Over time, as you make regular repayments, the principal balance decreases, and the interest charged on the remaining balance also decreases.
With an Interest Only loan, your regular repayments cover only the interest charged on the loan. This means that during the interest-only period (usually a set timeframe, such as 5 or 10 years), you are not repaying the principal amount borrowed. As a result, your loan balance remains unchanged during the interest-only period. After the interest-only period ends, the loan typically reverts to a P&I repayment structure, where you start repaying both the principal and interest.
With P&I loans, your monthly repayments are higher because they include both principal and interest. In contrast, with Interest Only loans, your repayments are lower because you’re only paying the interest portion.
P&I loans are structured to be fully repaid by the end of the loan term (e.g., 25 or 30 years), as regular repayments reduce the principal balance over time. With Interest Only loans, the loan balance remains the same during the interest-only period, so the loan term may need to be extended to ensure the principal is repaid after the interest-only period ends.
P&I loans generally result in lower total interest costs over the life of the loan, as you’re actively reducing the principal balance. Interest Only loans, on the other hand, can result in higher total interest costs since you’re not repaying the principal during the interest-only period.
Interest Only loans are commonly used by property investors to manage cash flow, as the lower repayments during the interest-only period free up funds for other investments. P&I loans are typically preferred by borrowers who aim to pay off their loan faster and minimize interest costs.
Lenders evaluate your financial situation to determine your borrowing capacity. While specific criteria differ between institutions, common considerations include your income, expenses, employment history, credit history, assets, and liabilities. They assess these factors to determine your ability to repay a loan.
Banks typically analyze your income to determine your ability to repay a loan. They consider factors such as your employment status, salary, wages, bonuses, and any other sources of income. They also assess your regular expenses, including living costs, bills, loan repayments, and other financial commitments.
Lenders calculate your debt-to-income ratio by comparing your total monthly debt obligations (such as existing loans, credit card payments, and other commitments) to your monthly income. A lower debt-to-income ratio generally indicates a lower financial burden and may increase your borrowing capacity.
Banks assess your credit history by reviewing your credit report, which includes information about your past borrowing and repayment behavior. A good credit history with a consistent record of repaying debts on time can positively influence your borrowing capacity.
The LVR represents the proportion of the property’s value that you are borrowing. Banks generally have maximum LVR limits, meaning they may only lend up to a certain percentage of the property’s value. A lower LVR can increase your borrowing capacity, while a higher LVR may result in more limited borrowing options or require additional measures like lenders mortgage insurance (LMI).
Banks consider prevailing interest rates and the term of the loan when assessing your borrowing capacity. Higher interest rates can reduce your borrowing capacity, as they result in higher monthly repayment obligations. Additionally, longer loan terms can impact the amount you can borrow, as they extend the repayment period.
Banks evaluate your financial stability, including factors like your employment history, length of time with your current employer, and stability of income. Demonstrating a stable financial situation can enhance your borrowing capacity.
Stamp duty is a government tax imposed on property transactions. The amount of stamp duty varies based on the property’s purchase price, location, and whether you are a first home buyer or not. It is typically one of the largest costs associated with buying a property
Engaging a solicitor or conveyancer is essential for handling the legal aspects of the property purchase, including title searches, contract preparation, and settlement. Their fees can vary, so it’s advisable to obtain quotes from different professionals.
It’s recommended to conduct building and pest inspections to identify any potential issues with the property. These inspections come at a cost but can help you make an informed decision about the property’s condition and potential future expenses.
If you borrow more than a certain percentage of the property’s value (usually 80%), lenders may require you to pay LMI. This insurance protects the lender if you default on the loan. The cost of LMI varies based on the loan amount and the loan-to-value ratio (LVR).
When applying for a mortgage, lenders may charge an application or establishment fee. These fees cover administrative costs associated with processing your loan application and setting up the loan.
This fee is charged by the government for registering the mortgage on the property title. The cost varies depending on the state or territory in which the property is located.
It’s important to arrange building and contents insurance to protect your property and belongings. The cost of insurance will depend on factors such as the property’s value, location, and the level of coverage you choose.
A real estate agent can help you find and negotiate the purchase of a property. They have knowledge of the local market, can provide property listings that match your criteria, and assist with the negotiation process.
Engaging a solicitor or conveyancer is essential for handling the legal aspects of the property purchase. They review contracts, conduct title searches, prepare legal documents, and facilitate the settlement process.
If you require financing for the property purchase, a Madd Mortgage Broker or Lender can assist you in obtaining a loan. They can help you understand your borrowing capacity, compare loan options, and guide you through the loan application process.
It’s recommended to engage professionals to conduct building and pest inspections on the property. They assess the property’s condition, identify any structural or pest-related issues, and provide you with a comprehensive report.
A valuer assesses the property’s market value to determine its worth. They provide an independent valuation report, which can be essential for obtaining financing and ensuring you’re paying a fair price for the property.
Consulting with an accountant or financial advisor can provide valuable insights into the financial aspects of the property purchase. They can assist with tax implications, financial planning, and ensure you have a clear understanding of the financial commitments involved.
It’s important to arrange insurance coverage for the property. Engaging an insurance provider will help you obtain building insurance to protect the property’s structure and contents insurance to safeguard your belongings.
Take into account your future plans and long-term goals. If you anticipate changes such as expanding your family, working from home, or accommodating aging parents, a house may offer more flexibility. If you prioritize convenience, low maintenance, and a city-centric lifestyle, a unit might be a better fit.
Having a good credit score is crucial if you want to obtain the right pre-approvals for big purchases later in life, such as a car loan or a mortgage.
In some scenarios, it can also allow you to access more favourable loan terms and interest repayments
– so what do you need to keep an eye out for in order to stay in the best possible position?
The concept of a “late repayment” may vary greatly between yourself and your lending provider. Even if you are as little as fourteen days behind on paying your phone bill, this can be lodged on your credit file – and take years to remove.
If you shop around for credit and apply to multiple credit providers within a short timeframe, this can lower your credit score as an enquiry is added to your report each time you apply – flagging you as a risk for potential providers.
Interest free, “buy now pay later” platforms like Afterpay are seen as an ongoing line of credit, or debts that you could potentially have. While this can impact obtaining future credit, missed payments will also be lodged as a red mark on your credit file.
When calculating your credit score, credit reporting bodies generally look at the type of providers you have applied for credit with. Payday loans usually come with massive interest fees attached, and indicates that you may not be financially stable.
While your current address may not seem like a factor when it comes to what affects your credit score, having incorrect details listed greatly increases your chance of a miscommunication when it comes to staying on top of any repayment obligations.
Unfortunately many Aussies only tackle their credit file once it’s too late – meaning that they’ve been declined for a loan, and they’re trying to understand why. Check your credit file regularly to spot any potential red flags and avoid future pain.
With their entire business built on referrals, the team at Madd Loans have taken the mortgage broking industry by storm. Their overwhelmingly positive feedback has helped them to take out numerous industry awards, including the title of “Queensland’s Broker Of The Year” for four consecutive years. However, after working with a broad variety of clients in regards to their mortgage options, it made sense for the team at Madd to have the capacity to offer a full financial planning service.
If thinking about your financial future and tackling your credit score strikes a chord with you, then it might be time to speak to a professional. Whether you’re chasing mortgage solutions or a financial fairy godmother, the team at Madd work together as a collective to turn your goals into reality.
Home loan navigation can be challenging, particularly when you’re unsure about the right choice for your needs. Fortunately, teaming up with a mortgage expert ensures that you have a knowledgeable ally to guide you through the process.
If contemplating your financial future resonates with you, now may be the perfect time to consult with a professional. Whether you’re seeking mortgage solutions or in need of a financial fairy godmother, the cohesive team at Madd works collaboratively to transform your aspirations into actual achievements.
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