FAQs: Navigating the Mortgage Process

1. What is the difference between a fixed-rate and a variable-rate mortgage?

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• Fixed-Rate Mortgage: The interest rate remains the same for a set period, typically 1 to 5 years, providing predictable monthly payments.

• Variable-Rate Mortgage: The interest rate can change based on the Reserve Bank of Australia's (RBA) cash rate and market conditions, which can lead to fluctuating monthly payments.

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2. How much of a deposit do I need to buy a home?

• The required deposit varies but typically ranges from 5% to 20% of the property's purchase price. For deposits less than 20%, lenders may require Lenders Mortgage Insurance (LMI).

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3. What types of home loans are available?

• Standard Variable Loans: The most common type, with interest rates that can change.

• Fixed-Rate Loans: The interest rate is fixed for a certain period.

• Split Loans: Part of the loan is fixed, and part is variable.

• Interest-Only Loans: Only the interest is paid for a set period, usually up to 5 years.

• Low-Doc Loans: typically suitable for borrowers who can't provide the standard paperwork (i.e. tax returns or PAYG) that more standard loans require. Business owners and self-employed individuals may be good candidates for this type of loan.

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4. What factors affect my mortgage interest rate?

• Several factors can influence your mortgage interest rate, including:

  • Credit Score: Higher scores generally qualify for lower rates.

  • Loan-to-Value Ratio (LVR): Higher LVR can lead to higher rates and may require LMI.

  • Loan Type: Different loans have different rate structures.

  • Market Conditions: Economic factors and the RBA's cash rate decisions impact rates.

  • Lender: Different lenders offer varying rates and deals.​

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5. How do I get pre-approved for a home loan?

• To get pre-approved, you typically need to provide the lender with:

  • Income Verification: Recent pay slips, tax returns, and employment details.

  • Credit History: Authorization for a credit check.

  • Assets and Liabilities: Bank statements and details of existing debts.

  • Identification: Proof of identity, such as a driver's license or passport.

• The lender will assess your financial situation to determine how much you can borrow and at what interest rate, giving you a conditional approval subject to final checks such as a property valuation. 

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6. What government grants and incentives are available for first home buyers?

• First Home Owner Grant (FHOG): A one-off grant available to eligible first home buyers who are buying or building a new home.

• First Home Loan Deposit Scheme (FHLDS): Allows eligible first home buyers to purchase a home with a deposit as low as 5% without needing to pay Lenders Mortgage Insurance (LMI).

• Stamp Duty Concessions: Many states and territories offer stamp duty exemptions or concessions for first home buyers.

• First Home Super Saver Scheme (FHSSS): Allows first home buyers to save for a deposit using their superannuation fund, offering potential tax benefits.

These grants and incentives can vary by state and territory, so it's important to check the specific benefits available in your area**.

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**Note: Information above is effective June 2024, Government grants and incentives are subject to change, and it is best to check the relevant state or territory website to ensure up to date information.