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Financing Your First Home Strategically –

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Financing Your First Home Strategically –


Around 60% of Australian women own their own home on a mortgage or a debt-free basis, compared to 56% of men. In younger age groups (under 35), some 27% of women and 21% of men have bought their own homes, mostly with a mortgage. If you are keen on switching from renting to purchasing your dream home, you may wonder how to finance this transaction. Taking a strategic approach is vital so as to secure favourable terms and avoid paying more than you have to in the long run.

Building Your Savings

Prior to seriously looking at different mortgage options, work on building a healthy savings account. The average house deposit is 20% of the purchase price so once you work out which type of home you wish to buy and the area you wish to live in, you can start working towards saving the required deposit. Factor in other expenses — such as stamp duty and solicitor’s fees. Save as much as you can, since smaller deposits usually mean bigger loans and a higher loan-to-value ratio. This is also a good time to complete a few online mortgage calculations to work out how much your monthly payment would be. List down your monthly expenses so you know the maximum amount you could comfortably spend to pay back a housing loan.

Knowing the Difference Between Interest and Comparison Rates

Research shows that around 10% of Australians do not know their current interest rate — a fact that could lead you to make a regrettable financial decision. Understanding the overall cost of your loan is vital if you are to obtain the best deal and this involves clearly identifying interest and comparison rates of different mortgage options. An interest rate is typically an annual percentage of the money you borrow and it differs depending on your loan purpose, loan-to-value ratio, loan amount, and repayment type. A comparison rate, on the other hand, takes into account all costs you actually incur when you take out a loan — including hidden fees and higher rates after initial ‘honeymoon periods’. Make sure to study comparison rates keenly because they reveal the real difference in costs (and can help you find flaws in mortgages that offer seemingly appealing interest rates).

Availing of the Pertinent Grants

There are various grants and forms of aid for people buying a home for the first time. These include the first home owner grant, stamp duty concessions, first home loan deposit schemes, the Family Home Guarantee, or the first home super saver scheme. The first home owner grant, for instance, is a national scheme funded by states and territories. It involves a one-off payment to those who satisfy specific criteria — for instance, the home you are buying cannot be valued at over $750,000. You won’t be considered eligible if you owned a home prior to 1st July, 2000 or if you lived in a home with you owned or part-owned on or after 1st July, 2000 for a period of at least six months.

If you are buying a home for the first time, the first step to take prior to financing is to work out the maximum monthly amount you can reasonably afford to pay. This will influence the type and size of homes you look at as well as your chosen area. When comparing mortgages offered by different banks and financial institutions, look both at interest and comparison rates so you can work out which offer is the best in the long run. Finally, research the different grants and forms of aid available, including the first home owner grant.



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