A Simple Home Loan Guide for the Australian Market
For those looking to purchase a property in the land down under, getting to grips with the Australian property market can be a bit tricky. There is an overwhelming amount of information out there, and that’s on top of the various things you need to consider when choosing your ideal property.
Knowing what kind of home loan you can and should get is an important part of the process. This guide will help you to understand more about the different types of home loans available on the Australian market, so you can start taking the next steps in purchasing your home.
Buying a property in Australia
The process of buying a home in Australia can differ from other countries in several ways, so if you’re an expat or overseas investor, it’s essential that you familiarise yourself with the process.
Before you look into home loans, you need to do your research and make a plan and budget for your property purchase. For advice on the best locations for your budget, it’s good to speak to a real estate agent who can provide you with local advice and point you to the areas that may offer the best returns.
You need to set a realistic budget as if you are unable to prove that you can afford to purchase and maintain a property at your prefered price, then it’s unlikely you will find a lender to approve your home loan.
Other professionals you may want to speak to, include a conveyancer to help you with the legal work, a mortgage broker with experience in assisting non-residents to help you apply for the right mortgage, along with an accountant and buyer’s agent if required.
You want to get your mortgage pre-approved before you start looking for your new home, as you will need to be quick to snap up a good property. With a pre-approval in place, you are much more likely to snap up a good investment, and you can move forward with the knowledge that you’re eligible for a loan.
Types of home loans
When you start looking for a home loan, you will notice that there are several different types available on the market, each with various features and benefits on offer. While having this amount of choice can be a good thing, it can also make it more difficult to find the right loan for your needs and circumstance.
It’s important to take your time and carefully consider the different features, variations in fee structures, and discounted rates to determine which loan would best meet your needs.
Variable rate loan
With a variable rate home loan, the interest rates you pay are determined by the lender and may change over the duration of your loan in accordance with market conditions. This means that you can be paying higher repayments one month, and lower ones the next.
The benefit of this type of loan is that it gives you some more flexibility, which is why it tends to be more popular with borrowers. Lenders may offer additional features, such as extra repayments, an offset account or a redraw facility, which can make this type of loan more attractive.
The downside is that you never know for certain when rates will go up or down, which makes it more difficult to budget for your repayments.
Fixed rate home loan
In contrast with the variable rate loan, a fixed rate loan guarantees a fixed interest rate throughout the course of the loan. This makes it easier to budget for repayments, as you won’t have to worry about them increasing over time.
While this security can be a great advantage, there are some downsides to a fixed rate loan. For one, the rates tend to be set higher than those of variable loans, although if interest rates rise during this time, then you may end up paying less. Lenders also typically don’t offer the same benefits, such as an offset account or extra repayments.
Split rate home loan
A split rate loan allows you to pay part of your home loan at a fixed rate, with the remainder set at a variable rate. This can be a good option if you want some flexibility along with the security of paying a fixed amount.
Other loan types include interest-only loans, low deposit loans, guarantor loans, and low doc home loans. The kind of home loan that is right for you will depend on a variety of factors, so if you are unsure which may be best for you, then speaking to a mortgage broker or financial adviser could be a good option.