You must get your finances straight before buying a lot and engaging in the building process. Once you conduct a financial health check and determine your monetary situation, you must plan how to fund your home without stretching your resources too thin. Much needs to be done, from arranging the deposit to finding potential financing options and availing of all available grants and commissions. Here’s an overview of the entire process so you can plan and proceed without complications.
Engage a Reliable Mortgage Broker
Engaging with a mortgage broker early on is always recommended if you plan to take a home loan. While there are thousands of lenders available in the market, finding a mortgage product that meets your current requirements and aligns with your financial goals and position can be challenging. That’s where a mortgage broker can come to your aid. Mortgage brokers are obliged to act in your best interest. They will ensure you secure the desired amount at the best possible terms while simplifying the entire process. From finding the best mortgage products to facilitating negotiations and completing the application process, they will do it all for you.
Secure all Applicable Government Grants and Concessions
The Australian government offers grants and concessions to help aspiring homeowners in their homeownership journey. Ensure you know these and don’t miss out on anything that might help you cut costs.
New South Wales
First Home Owner Grant (FHOG)
- Covers a one-time grant of $10,000 for building or purchasing a new home valued at $600,000 or less.
- To be eligible for this scheme, you must be an Australian citizen at least 18 years old.
First Home Buyers Assistance Scheme (FHBAS)
- Provides exemptions or concessions on transfer/stamp duty for first-time homeowners.
- Full exemption for homes valued up to $800,000 and concessions for homes between $800,000 and $1,000,000.
- To be eligible, you must be a first-time buyer, and the property must be intended as the principal place of residence.
Queensland
First Home Owner Grant (FHOG)
- Covers a one-time grant of $30,000 for building or purchasing a new home valued at $750,000 or less.
- Must not have previously owned property in Australia.
- o be eligible for this scheme, you must be an Australian citizen at least 18 years old.
Transfer Duty Concessions
- Offers a concession on transfer/stamp duty for first homebuyers purchasing a home valued at $700,000 or less.
- For vacant land intended for first-home construction, the concession applies to land valued at $350,000 or less
- The exact concession amount will depend on the property’s value.
- To be eligible, the property must be intended as the principal place of residence.
Federal Government Grants
First Home Guarantee (FHBG)
- Part of the Home Guarantee Scheme (HGS), it supports eligible first-time homebuyers in purchasing a home with a deposit as low as 5% without needing Lenders’ Mortgage Insurance.
- To be eligible for this scheme, you must be a first-time home buyer and meet the income criteria (up to $125,000 for individuals and $200,000 for couples).
Family Home Guarantee (FHG)
- Assists single parents in purchasing or building a new home with a deposit as low as 2%.
- Available to single parents with at least one dependent child.
How Much Can I Borrow for a Home Loan?
When it comes to home loans, there are several thousands of loan options available in the market. But there is a certain limit to how much you can borrow. You must determine your borrowing capacity at the beginning itself and plan your finances accordingly. Once you are clear on this front, you can make rational budgeting decisions and streamline your home investment decisions. Your borrowing capacity depends on certain factors –
- Your current financial situation
- Your repayment capacity
Your potential lenders will assess your income stream, credit card limits, living expenses, loan type and number of dependents, amongst other factors and calculate your borrowing power.
Home Loan Options: Types
The home loan market has diverse loan options, each with its benefits. The right one for you will depend on your financial situation and needs. Here’s an overview of a few common loan types that you can choose from –
- Standard Variable: (There is no decided interest rate; the lender can choose to change the interest rate depending on the official rate set by the Reserve Bank of Australia).
- Fixed Rate: You lock in an interest rate with your lender, and it will remain the same for the lifetime of your loan.
- Interest Only: For the first five years, you must only pay the monthly interest rate. After this interest-only duration, you must pay the principal and interest amount.
- Low Doc: You can secure a loan without submitting financial documents like pay slips, but the interest rate and deposit amount for this kind of loan are relatively higher.