Home Loans - Getting Started
What is a home loan?
A home loan or mortgage is a loan agreement between a lender and a property owner. The property will be the security holding by the lender. In general, the loan agreement will include a few important things, such as: loan amount, interest rate, loan term (generally 25-30 years), security and its value. This article outlines the key basics for you to get started and wrap your head around home loans.
When do you need a home loan?
In general, you need to apply for a home loan when you are going to purchase an established property or when your purchased off-the-plan property is going to be settled soon. In this section, we will give a few most common scenarios when you need a home loan.
In terms of loan application, there is no substantial difference between buying an established property, or going to buy a land and then do the construction. Generally, before you are going to sign the construction contract (Fixed Price Building Contract is always required), you need to get conditional approval done. After signing the contract and paying deposit, you then will get valuation and unconditional approval done accordingly. You can learn more about how construction loans work here.
However, if you are an owner builder looking for a construction, the process is a bit more complex and you need to make sure you have a specialist mortgage broker (like Reservoir Finance) helping you.
Home Loans by Purpose
Home ownership has always been a part of the “Australian Dream”. Due to the last cycle of real estate booming, housing affordability became a hot topic in the political space. Arguably, Scott Morrison’s favourable policy for the first home buyers before the election played a part in the last federal election in 2019. Policies include stamp duty rebate and First Home Owner Grant from the state level, First Home Loan Deposit Scheme from the federal level. On top of this, there are many deals (such as discounted rates or higher LVR) from lenders and even brokers!
Home Loan Repayments
Principal plus Interest home loans
Interest Only home loans
Interest in Advance home loans
Home loans by interest rate type
In general, there are only two types of interest rate, variable and fixed. However, there are many variations and combinations. Our in-depth guide compares the pros and cons of both and shows how much money you can be saving when applying some advanced strategies.
Variable rate home loans
Fixed rate home loans
Split home loans
As there are advantages and disadvantages for both variable and fixed rate home loans, some people may want to have a combination between these two. With most lenders, borrowers can split their home loans into a few splits. For example, based on your future financial situation prediction, you may want to have 1/3 loans as variable, 1/3 loans as 1 year fixed, and 1/3 loans as 3 years fixed.
What documents are needed to apply for a home loan?
Home loan applications are complex and require lots of documentation. There are 6 broad categories:
- Identity – Who are you?
- Income – How much do you earn?
- Liability – How much do you owe?
- Expenses – How much do you spend?
- Security – What will the lender hold?
- Assets – What does your personal balance sheet look like?
Read our in-depth guide here to find out what documents and why they are needed.
How much can I borrow?
We are able to provide a detailed borrowing capacity calculation for you – for FREE. But we may need you to help us understand your financial situation better.
Please fill in the following two calculators on our website, print the calculators as pdf, save and send them to [email protected] – we will get back to you within 1 calendar day.
Calculator 1: How Much Can I Borrow? (No worries if the calculator gives you a result lower than your expectation. We can always help.)
Calculator 2: Budget Planner. (It’s always important for us to understand your incomes but also expenses. Be patient as it’s not a short form.)
We, Reservoir Finance mortgage brokers, will help you all the way for your financial future. With good preparation under the hands of professional and dedicated brokers, your home loan applications and financial future will be on a good track.
For further reading, check out our guide on how you can increase your borrowing power.
We can help you choose and apply for a home loan with ease!
There are many reasons why going with a broker for home loans is a better outcome. One of them is making sure that you choose the right home loan for your personal circumstances.
Reservoir Finance is a 100% independent mortgage broker who are values based. Meaning we do not take shortcuts for a quick win. Contact us using the form below or call us on (02) 8288 9123 and we’ll be glad to have a chat with you and help you out!