Financing Options and Guidelines for First Home Buyers.
Congratulations for taking a great decision in the early stage of life to own a house of your own. Buying a home for oneself is the second most crucial dream of every individual after finding a suitable life partner. It’s a fantastic feeling to live and breed your generations under your own roof.
Being a house owner allows you to do many things in life, which you are hesitant of doing in a rented accommodation. There will be no one to bother you about the loud music and late night parties. You can live in a world of your dream by constructing the same in a way you want. Architecture and interior can also be designed as per your convenience. Having a kitchen garden and evening snacks in your garden is a great life experience to satisfy your soul.
Once you decide to buy a house in Melbourne and start searching Melbourne home loan, there will be plenty of rigorous tasks one is supposed to go through. Primarily planning of your finances is the most critical activity. We exist because an individual might not know the legal rules and the process of selecting a house to own it. The Melbourne home loan market is flooded with a number of options. S. K. Finance is pioneer among home loan brokers in Melbourne plays a vital role in the great Australian dream of owning a home. SK Finance helps you find best home loans in Melbourne.
Before you start to analyse about, how you will manage such a vast fund? Let us walk you through the entire queries and process with all the possible solutions to your curiosities.
What Are The Documents I Need To Have? When you enter into any basic home loan related financial liabilities, you must have below-listed documents readily available with original documents along with a spare copy of all of them.
These are primary things banks do ask before you even apply for home loan in Melbourne…
- Your government Ids
- Your current and previous address proof
- Your complete employment records
- Bank statements of at least six months
- Your educational proofs
- All your income records
- The latest copy of tax assessment
- Year-long record of physical receipts of the rented house
- Brokerage receipt of a registered broker.
How Much Home Loan Can I Borrow? Borrowing capacity of every individual is different. It is always capped on your current earnings. It is subjective to every individual’s current earning and repayment capacity.
Here is the list of factors to analyse your borrowing capacity…
- Your current income
- Your ongoing financial commitments
- Home Loan type you prefer
- Your credit history
- Your employment history
- Your existing savings
- Current holding of immovable assets
Calculating the above help you set a realistic budget and clear the picture of how much you can borrow foe home loan in Melbourne in the given circumstances.
- At the very beginning, you need to set an affordable budget. The budget should be within the capacity and must not be that huge, to spend the rest of your life feeding the banks.
- Your spouse income can also be added to increase the amount of borrowing from banks.
- Reduce your credit cards limits for an incremental in borrowing amount.
How Will I Repay The Borrowed Amount? The home loan repayment capacity will depend upon your current income. You need to compare the level of current income and what portion of it will go as home loan repayment. The repayments are cyclic in nature. Every month a significant amount is deducted as equated monthly instalment against the home loan repayment. Therefore it is advisable to choose a suitable home loan be it a fix home loan or variable home loan to counter any insurgency in future. In case you generate any additional income or any hefty profits/bonus, you must repay to banks for offloading the principal amount from home loan.
- You must choose home loan repayment structure in a way that it shouldn’t bother your lifestyle.
How Much Do I Need To Pay As Initial Payment To Bank? The initial home loan deposit is nothing but your contribution to buy the selected property. Have you thought of how much deposit required for a home loan in Melbourne? The borrowing amount depends upon the initial deposits that you pay to the bank. The home deposit and home loan borrowing are inverse in relation. The higher the deposit, lower will be the home loan borrowing and vice versa.
What Comprises Of Home Loan Deposit? Banks do consider your financial health and responsible repayment of all the current liabilities to analyse the deposit amount. They minutely check your saving habits and regular payment of dues.
Here is the list of things to keep for smooth approval of home loan in Melbourne…
- Fixed deposits receipts
- Ancestral immovable property
- Cash available in saving bank account
- Declared holding in an existing property
- Investments in equity shares of listed companies
- Non-repayable Cash gifts from close family relatives
Note: Above are the ideal ways; however, your lender might have fewer or larger criterion based on their company policy. Sometimes they also consider unique circumstances.
- Collect all the property documents well in advance and file them properly keeping a copy in spare.
- Cash items should be readily available in your savings account for more than three months for smooth processing of a loan.
Why Do Banks Give Home Insurance (LMI)? The lenders are very professional and frugal by nature. They always protect their loans through insurance policies (LMI) to get repaid under unforeseen circumstances. Many times happens when a borrower is unable to repay the loans due to un-affordability. Lender Mortgage Insurance (LMI) protects the bank in such cases. It is mandatory to have an LMI policy for all the loans which are above 80% of the documented cost of a property. Spending extra amount on LMI is a win-win situation for lender and borrower as future in unseen for everyone. Protection is always better than cure.
What Is First Home Owner Grant? The first home buyer grant is (FHOG) to encourage people to buy a house of their own. The government provides a significant amount as a grant to first house owners. The % of grant varies depending upon the area you have selected. Isn’t that a big relief!! FHOG amount is being released only when the house comes to a construction stage. The calculation of FHOG is always based on the Loan to Value ratio (LVR).
Which home loan should I choose for myself? All good so far, now the time has come to think about which investment is suitable for me? You should choose home loans wisely to optimise the entire process and better uses of hard earned money. There are various types of home loans you can choose from. They are variable rate, fix rate, combination of fixed and variable, Line of equity loan, 100% offset account and deposit guarantee bond, etc.
Let’s us a have a look on the must consider features of a good home loan…
- Low Interest Rate Offerings: When you compare loans of various banks or credit societies, you should always take the help of best mortgage broker in Melbourne. Professional finance broker in Melbourne like SK Finance can tell you the nitty-gritty of loan interest rates, as to why such a bank is offering low interest rate than others. Sometimes they make the rate look so lucrative to attract and further cover the same through hidden charges. Always compare home loan rates on various info compare platforms to find the best one for you. One should wisely choose interest rates such as fix rate or variable rate as the tenure is too long for home loans in Melbourne.
- Facility to redraw: That’s a fantastic feature to offload interest amount on your loan. Wondering how interest can be saved on a loan? Redraw facility enables you to put your extra money in your loan account which can be withdrawn at any given point of time in future. Banks reduce the extra money from your principle till the time that money is available in that account. Thus you save on interest using this facility.
- Low Discharge Fees: When you pre-close any loan, banks do charge duty on that due to loss of income cause of pre-closure. As everyone wants to close their loans as soon as possible, he/she should choose loans which offer low discharge fees to save money.
- Maintenance Fees: Many banks do charge annual maintenance fees on holding loan account with them. Sometimes those ongoing fees come to $200-$500 monthly. Choosing wisely an account will save you that cost or may a little bargaining over that could work.
What are other charges and how it’s burdening me? Ideally you should consider an additional 5% on the total loan amount. There are many charges which banks do charge over the cost of the property. These are standard charges, and all the banks and credit societies do charge.
A glimpse of other charges can be found below…
- Application Fees: Many banks charge application fees and valuation fees
- Property Inspection Charges: Banks do check the entire list of documents related to the property to lend only for the clean property. They ensure the property should not be in dispute, title clearance, maps authorised by the local authority, defects and history of repair of a pre-constructed property. All that exercise does cost you under property inspection charges.
- Legal Charges & Stamp Duty: Legal charges and stamp duty are also applied while you purchase a property. These charges are variable in nature and depend upon the cost of the property.
- Mortgage and Registration Fees: These fees are to be levied by local government authority against the transfer of property (land or constructed house).
- Lender Mortgage Insurance (LMI) charges: we have already discussed above the LMI wherein banks do mandatorily apply insurance charges to cover their risk of any future uncertainty.
- Shifting Cost: When you shift your house, you need to incur a lot of expenses to transfer your goods from old to a new home. Many times this cost is being neglected by people. This also depends upon the distance and weight of goods to carry in your new house.
What is the process of buying a house? Now you have a fair idea of all the things and hard work you need to do while buying a new home for yourself.
Let’s summarise the process to own a new house for you…
- Determination of Budget: Based on the analysis of your income and expense while calculating existing liabilities and valuation of assets we came to a number we can afford to buy a house from. That’s the most crucial part as you need to check the affordability through this exercise. This hard work will help you being practical and will save a lot of time to find a property within your budget.
- Identification of property: Once we have determined our budget, we need to check out the location and size of the house we can afford in that locality. With the help of local property brokers, advertisement in a newspaper and sitting in an auction can undoubtedly help you get a home of your dream. This might take some time, but it’s a lifetime decision and worth spending time over.
- Choosing a suitable home loan: Till now we have already shortlisted the properties based on our budget and locality, it’s time to analyse the available home loan options in the market. Choosing a perfect home loan while considering the interest rates and other charges is a noble task and worth putting efforts to save a massive amount of money.
- Legal documentation: Processing of loan through a bank or a credit society requires ample time for legal documentation and contract transfer. Save an entire day for this activity.
- Start Living: Great work so far. It’s the time to move in the property and enjoy the pleasure of living in an owned house. Many of us see this dream, but only a few of us can live this dream.
So far we have learnt how to convert a dream of having a home into reality. We have gone through all the basic nitty-gritty from keeping a list of documents, budget analysis, and identification of the property to going through legal formalities. Since we now understood entire process let’s take a step forward and step out to hunt a property, rest will be taken care by mortgage broker in Melbourne like SK Finance. SK Finance which is the best home loan provider in Australia has a consistent track record of being a helping hand in fulfilling the dreams of many Australian citizens.
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