Scouting for a new home can be a fun and exciting process. But it might not be as fun once the reality of home financing hits. You need to cushion the blow with smart and strategic financial solutions like home loans. Through this option, you get to live in your dream home without being too burdened by the financial repercussions of purchasing real estate.
In this article, we are going to address some of the most asked questions regarding home loans in Parramatta. We understand how important it is to know the process before we sign up for it, which is why we also threw some tips that you can use in your journey. Let’s start with the most basic one: What is a home loan? Home Loan 101: What is it?
A home loan is an amount borrowed from a lender or a bank to purchase a property. Whenever you get a home loan, the property that you are intending to buy is automatically used as collateral for the loan. The approval and the amount that you can borrow is based on your eligibility as a borrower. Different lending firms will have a different set of criteria for who is eligible and who isn’t.
Here in Parramatta, home loans are typically disbursed after a down payment has been made. However, not all lending firms subscribe to this practice. Some even provide the money with zero down payment. There are also varying ways in which the interest is charged. So, it is best to talk to your broker or lending firm about the details of your home loan.
Who can apply for a home loan?
Anyone with the following qualifications can apply for a home loan:
- Minimum monthly income
- Buyer’s minimum and maximum age
- Loan quantum
- Residency status
When you are applying for a home loan, it is also important to get other things ready like a house deposit, credit history, proof of income, identification cards, bank statements, council rates, and many others. If it is the first time that you are buying a home, you may also apply for a First Home Owner Grant.
Self-employed? Don’t worry. You can still qualify for home loans in Parramatta by providing evidence of your ability to pay the monthly dues. It is up to the lenders on how they will assess your application based on the documents you present, so make sure to pay attention to details.
What are the types of home loans?
There are so many types of home loans in Australia, namely:
- Bridging Loan
This is a short-term loan that allows the borrower to sell their old property to purchase a new one. Through this loan, they are better equipped to navigate that awkward transition period of moving from the old house to the new one.
- Construction Loan
Construction loans are supplementary loans that allow you to pay for the ongoing expenses that are necessary throughout the construction process.
- Fixed vs Variable Home Loan
Fixed-rate loans are exactly what they sound like – they are home loans that come with a locked-in interest rate. Meaning, they cannot be adjusted throughout the payment period. There are many advantages to getting a fixed-rate loan in that you know exactly how much you need to pay every month. But the downside is that you still pay the same interest rates even if market changes call for a decrease in rate.
- Interest-Only Home Loan
When you are applying for a loan, you are free to choose whether you’ll only pay the interest on the loan or you’ll pay both the interest and the principal. Paying for interest alone can free your cash up to spend on other expenses for your new home, but the decision will always be up to the lenders and their assessment of your capacity to pay.
- Introductory Loan
Introductory home loans are those that come with a very low-interest rate for the first 12 months. It is perfect for those who are just starting out since you don’t need to have a lot to get your home buying journey started. Just brace yourself for when the standard rates kick back in again.
There are many other types of loans including pension loans typically reserved for the aged and disabled population, line of credit loans, low doc loans, and many others. As you can see, there’s a host of options for homebuyers out there. Make sure to ask your lending partner or a mortgage broker to make a more informed decision.
How is interest computed?
There are various ways on how your interest will be computed. Most lenders retrofit their calculations based on the results of their assessments. Some will be granted a lower interest rate while others will not. It is best to ask your lenders about the specifics of the interest rate calculation.
What are refinancing and repricing?
There is a chance that you might decide to switch from one lender to another over the course of your loan repayment period. The reason why most borrowers do this is that they can enjoy lower interest rates with the other lender. In that case, you will need to venture into what is called refinancing.
Repricing or conversion, on the other hand, is when you refinance with your own bank or lender. Banks and lenders nowadays offer more flexible options for their borrowers. So, choose your lending company wisely.
What are the roles of a home loan broker?
If you are still on the fence about getting a home loan, perhaps consulting with a home loan broker can make things easier for you. Brokers are connected with multiple lenders. One of them may have the perfect home loan opportunity for you!
Aside from getting you the best loan deals, brokers can also handle the paperwork so you don’t have to. They can determine which documents are needed for your application and filter out the unnecessary ones. They can also negotiate terms on your behalf. Finally, they can serve as a guide that will help you through the process of home loan applications.
Want to learn more?
If you are interested in home loans in Parramatta, feel free to consult with our experts here at FinKonsel. We have Parramatta broker mortgage services that you can avail of should you wish to push through with your home loan application.
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