What’s the secret to buying my first home?
Saving for it.
Saving for a Home Loan or Mortgage isn’t glamorous but it has to be done.  So here are some savings tips for First Home Buyers to help get you into the property market.
How much should I be saving?
One of the first rules of saving is to set a goal.  But what should that goal be?  Different people have different needs, but a rough guide is that you should be saving 10% of your pre-tax income.
What are you spending?
To help with saving, you need to know what you’re currently spending.  And not just on the big items like rent, utilities and groceries.  Get yourself a notebook and every time you spend money, write it down.  Everything.  For at least a month but preferably longer.  You’ll be surprised where your money goes.
Eliminate credit card debt
Credit card debt is expensive money and you need to eliminate it.  Consider transferring the debt to a new card that gives you an interest-free grace period, and save to get your balance down to zero as soon as possible.
A savings history
Lenders like to see proof that you can save.  So start putting something aside every month and you’ll be surprised how quickly it add up.

How much deposit do I need for a Home Loan?
Loan-To-Value Ration (LVR) – what the Lenders look at
When Lenders talk about Mortgage deposits they refer to Loan To Value Ration (LVR).  Loan-To-Value Ratio (LVR) is the loan amount divided by the value of the property.  Let’s say you want to buy a property with a purchase price of $400,000.  If you have a deposit of $80,000, your LVR is 80% (320k/400k).
The critical LVR – 80%
The critical LVR figure as far as Lenders are concerned is 80%.  If you don’t have 20% of the purchase price as a deposit, you will generally be required to pay for Lenders Mortgage Insurance (LMI).
Lenders Mortgage Insurance (LMI) – what is it?
Lenders Mortgage Insurance provides protection to the lending institution in the event that you default on your Home Loan.  Though Lenders Mortgage Insurance protects the Lender, it’s paid for by the borrower.  It’s a one-off charge that gets included in your loan amount.
Lenders Mortgage Insurance- owning a home sooner
You might not like having to pay Lenders Mortgage Insurance but LMI allows people with less than 20% deposit to get into the housing market sooner.  By using LMI on a loan, Lenders can pass on the risk of a borrower defaulting to a Mortgage insurer, so they can offer the same loan amount with less of a deposit.
No deposit Home Loans or 100% Home Loans
You might have heard about No Deposit Home Loans or 100% Loans.  As the name implies, No Deposit Loans are where you have no deposit and the Lender funds the entire purchase price of the property.  You will generally have to pay Lenders Mortgage Insurance, but for some high earners they can be an attractive option.  To learn more about Home Loan deposits, talk to on of our mortgage brokers today.
 
What’s a simple way to increase my borrowing capacity?
Reduce your credit card limit.
What’s a simple way to increase my borrowing capacity?
Reduce your credit card limit.
Most people know that reducing their debts can increase their borrowing limit.  But did you know that lowering your credit card limit can increase your borrowing capacity?
Lenders don’t like risk
In working out how much you can borrow, Lenders determine the likelihood that you might default on the repayments.  In performing this risk assessment, they look at a number of factors including your credit history and job security.  But something else they consider is your credit card limit.
Reduce your credit limit – raise your borrowing capacity
In the eyes of a Lender, the higher your credit card limit, the more chance you have to get into financial difficulty.  So, if you want a simple way to increase your borrowing limit, get rid of any surplus cards, and reduce your credit card limit to the absolute minimum you need.  Want to find out your Mortgage Borrowing Capacity?  Talk to one of our mortgage brokers today.

Where should I start looking for a home?
When you want to buy a home, the temptation is to start looking for it.  However it’s much smarter to organize your finance first.  And don’t just pre-qualify for a Home Loan – get pre-approved!
Sorting the finance first saves time and money
It’s more fun looking for a home than finding the finance.  No question.  But if you put the cart before the horse you’ll just waste time and money – and put yourself under a lot of unnecessary stress.  So your first port of call shouldn’t be a real estate agent, but your The Mortgage Gallery broker.
Pre-qualifying for a loan isn’t really enough
Some people get “pre-qualified” for a loan.  But “pre-qualifying” for a loan doesn’t necessarily mean that the institution will lend you the money.  The questions asked during pre-qualification are basic and the checking minimal.  “Pre-qualification” merely indicates the upper limit of the amount your might be loaned, assuming the information you supplied is accurate, and your credit history is favourable.  There is a better option.
Get pre-approved for a Home Loan – then look for the home
If you want a more reliable assessment of your borrowing capacity, you should try to be pre-approved for a loan.  This is a lengthier process that involves serious checking of your income and credit details.  However, pre-approval can spare you the heartache of finally finding the property you want to buy, only to find you can’t borrow enough.  To arrange your mortgage finance, talk to one of our qualified mortgage brokers.

How much is the First Home Owner Grant?
$7,000
The First Home Owner Grant (FHOG) provides $7000 towards the purchase of a first home for eligible applicants.  The First Home Owner Grant is not means tested.
This means that eligible First Home Buyers can receive $7000 regardless of their income, the area in which they are planning to buy or build, or the value of the home.  The grant is not taxed either.
Who is eligible for the First Home Owner Grant?
FHOG is available to people buying or building their first home and who meet the following criteria:
 Be a natural person (i.e not applying as a company or trust) and be at least 18 years of age.
 Never owned a home before.
 Must be an Australian citizen.
 Must reside in the home as your principal place of residence for a continuous period of at least 6 months commencing within 12 months of completion of the eligible transaction.
Applying for the grant
Our mortgage brokers can help you lodge an application with an approved agent.  To learn more about the First Home Owner Grant, speak to us today.

If I need help to buy a home, what should I do?
If you can’t save a deposit to get a Mortgage or Home Loan, maybe your parents, a relative or friend can help with a gift, loan or Home Loan guarantee.
Financial help with Home Loans – parental gifts
Obviously, the best kind of loan is one you don’t have to pay back.  If someone is willing to give you money to help you buy a home – and doesn’t expect it to be repaid – you’re very fortunate. But make sure you get it documented.  Otherwise your lender will consider it a loan that has to be repaid.
Financial help with Home Loans – parental guarantees
Your parents mightn’t have any spare cash, but they might be able to help you by going guarantor on your loan.  For example, most parents have equity built up in their own home that a Lender would consider as security – if your parents were agreeable.  However, your parents should be aware that going guarantor on your loan will affect their borrowing capacity, and possible their retirement lifestyle.  To learn more about parental loans and guarantees, speak to one of our mortgage brokers.

What should I be aware of when taking out a Mortgage?
Loans that seem too good to be true.
If you think you’ve found a Home Loan that sounds almost too good to be true, unfortunately, it probably is.  Here we look as some of the traps you should look to avoid in taking out a Mortgage.
In the mortgage market, you come to expect certain things. e.g If you have a small deposit, you’ll pay more over the term of the loan; that having a bad credit history is going to cost you; that certain loans have certain interest rates, etc.  So if you’re offered a Home Loan that seems much better than normal, look closely at the fine print.
Interest rate fixation
Most people looking for a Mortgage are preoccupied with finding the lowest interest rate.  But have you considered all the fees and charges, and the account flexibility you need?  You need to consider the entire cost of the loan – not just the interest rate.
Ignoring Mortgage fees and charges
Don’t ignore any fees or charges linked to a Home Loan; you never know how your circumstances might change. Upfront fees for taking out a loan and monthly fees are pretty easy to understand.  But, are there other fees that you may incure?  Will you be able to pay extra if you have a sudden windfall?  Will you be charged if you decide to move or refinance your Home Loan?  Can you increase your Mortgage repayments?
Lack of flexibility
Different loans have different levels of flexibility i.e EFTPOS, internet banking, redraw facility.  Ensure your Home Loan has all the features you want and don’t get locked into a Mortgage that will cost you to change if you refinance lenders.
Vendor financing
Some property developers offer “vendor financing”.  This may seem attractive because you don’t have to deal with a Lender, or because they’re willing to give you a loan when others won’t.  But be careful you’re not paying above market rates – for the property or your mortgage.
Get specialist help
The Mortgage market is extremely complex, and getting what’s right for you is not as simple as finding the lowest interest rate.  You need specialist help – the sort of help you get from our fully trained finance managers.

Source: MFAA

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