- 25 Nov 2024
- By Specialist Mortgage
With so much chatter about the Australian property market, it’s easy to get lost in the noise.
You’ve likely heard various truisms about securing a home loan, but the reality is that there are many options out there. Let’s clear up some common misconceptions and help you find the best path to home ownership.
Deposit isn’t a dirty word
One of the biggest myths is that you need a 20% deposit to get a home loan. While it’s a nice ideal, many lenders understand it’s out of reach for a lot of people. Many lenders offer options with home loan deposits as low as 5%, and if you qualify for a government guarantee, you might avoid paying mortgage insurance altogether.
Guarantor home loans are also becoming popular. These allow you to skip a cash deposit by having a guarantor (usually a family member) pledge their home equity. Another option is the Government Equity Scheme, where the government pays 50% of your home loan. This lowers your deposit requirement and monthly repayments but means the government owns half the equity in your home.
You may also be able to use the equity in another property towards the deposit for a new home.
A lifetime mortgage commitment
A 30-year mortgage is common because it means smaller monthly repayments, but you end up paying more in interest over time. Depending on your goals, it might be worth considering a shorter term. You’ll have higher monthly payments but save on interest overall. Knowing your financial timeline and cash flow can help you decide what’s best.
The Benefits and Pitfalls of Fixed Rates
With talks of interest rates falling in 2025, fixed rates are back in the spotlight. Choosing between fixed or fluctuating rates depends on your financial goals and cash flow. Fixed rates can provide stability, but they are usually higher than fluctuating rates. Some people choose to split their mortgage between fixed and variable rate.
When Interest-Only Makes Sense
Interest-only loans have a bad rap but may be useful for some buyers such as property investors. These loans mean you only pay the interest and not the principal, resulting in lower monthly repayments but slower equity growth. Some people start with interest-only payments to manage renovations or cash flow, switching to principal and interest payments later on.
Pre-Approval Is No Guarantee
Estate agents love pre-approvals because they show you’re serious and know your budget. Pre-approval can speed up the buying process, but it’s not a guarantee. Lenders still need to complete their due diligence including a property valuation, and most pre-approvals only last three months before needing renewal.
Your Path to Home Ownership
With so much advice out there, finding your path to home loan approval can seem daunting. But remember, you have options, and there’s no one-size-fits-all solution. Start the ball rolling by chatting with us about your goals and options. We can provide the facts and help you embark on your journey to owning a home.
If you’re ready to take the next step, get in touch with Specialist Mortgage today!
