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Buying your first home is a dream for most people, but the process can seem like a nightmare if you’ve never done it before. Here are five questions you need answers to before you get going.

Question 1 - What can I afford?

Before you start looking seriously at properties, you need to know how much you can afford.

What you can afford will depend on the amount that you have saved for your deposit, plus the value of the loan that you can reliably pay back to the bank. What you can borrow will be based on your monthly income less your monthly expenses.

You‘ll also need to consider other costs such as stamp duty, legal fees and insurance.

We will work with you to determine what these costs are and whether you may be eligible for any government grants.

Understanding deposits

How much should I aim to save for my deposit?

The deposit you contribute is considered the “equity” you hold in the property (obviously the higher the better).

We know that it can be hard to reach a 10% deposit, and harder to reach 20%. So, we have loan options available from as little as a 5% deposit.

What’s the minimum amount of deposit I need?

Great Southern Bank requires a minimum deposit of 5%. However if you only have a 5% deposit, you will need to demonstrate that it has been ‘genuinely saved’. There are different ways you can show this, so please talk to our specialist lenders about these options.

Calculating your deposit as a %:

The easiest way to consider this is to work through an example. Say you want to buy a property valued at $500,000 and you have saved $50,000, your deposit is 10%. You’ll require a loan of $450,000, which means your Loan-to-Value Ratio (LVR) will be 90%. You will need to consider fees including government charges and lender’s mortgage insurance separately.

Smart ways to reach your deposit goal

Great Southern Bank has some clever tools to help you achieve your goals faster.

  • Save every time you spend with The Boost
  • Avoid temptation – hide your savings in The Vault
How much can I borrow?
How much can I afford in repayments?

Question 2 – How much will I need upfront?

In addition to your deposit, there are other upfront costs to keep in mind.

Some common ones are:

  • Government charges, such as registration fees and stamp duty (check your state/territory eligibility requirements for a reduction/ wavier of stamp duty for first home buyers)
  • Lenders Mortgage Insurance (LMI) - this is generally included in your loan amount
  • Legal and conveyancing fees
  • Lending fees
  • Moving costs
  • Building and pest inspection
  • Utilities connection
  • Home and building insurance
Stamp duty

Stamp duty is a state government charge or tax. The amount is based on the purchase price of the property and is different in every state and territory. Some first home buyers may get a discount or not be required to pay it at all. We can help you work this out.

Building and pest inspection

When you sign a contract, be sure to include a building and pest inspection clause. This allows you to check the property is structurally sound and free of pests, like termites. When purchasing at auction, you’ll need to organise a building and pest inspection first. Building and pest inspections are an out of pocket expense for you.

Lenders Mortgage Insurance

If your deposit is less than 20% of the property’s value, most financial institutions will require Lenders Mortgage Insurance (LMI). LMI is taken out to protect the lender in case of default. It’s a one-off cost and is generally included in the total value of the loan.

Upfront costs calculator

Question 3 – Can I get a First Home Owner Grant?

If you have not previously owned a home, you may be eligible for a First Home Owner Grant. The grant is administered and funded by state and territory governments, and the amount and eligibility criteria vary. It’s usually paid directly to your lender and may be used as contribution towards the loan. We can help you apply for the grant when you take out a home loan.

Question 4 – What is pre-approval and how do I get it?

Understanding how much you can afford means you can act quickly and confidently when you find your dream home.

To get pre-approved, your income, expenses and savings are considered to work out how much you can afford to borrow. A credit check will also be completed.

It’s obligation free (you don’t have to take out the loan) and is usually valid for 90 days. If you don’t find a property during this time, it can easily be renewed.

Pre-approval is different from final approval. Pre-approval is only based on your ability to borrow, whereas final approval is given when you’ve found your new home and you want to make a formal loan application.

You should always indicate to your lender if you intend to bid at an auction, as you will need a suitable pre-approval.

Question 5 – Which is the best home loan for me?

The most important question of all! When choosing a home loan product, you are going to hear lots of product names and terms. At Great Southern Bank, we want to simplify these and the loan features that are offered.

When you are considering a home loan, you need to think about what you want from it. For example, do you want to know exactly what your monthly repayments will be? Will you benefit from using an offset account? Do you want to make extra loan repayments and have access to them?

Here are some things to consider when deciding:

Fixed interest rate vs variable interest rate loans

Fixed interest rate loans

  • Give you more certainty and make it easier to budget because you know exactly what your repayments will be for a set period (1, 2, 3 or 5 years).
  • Protect you against interest rate rises. However, if interest rates fall, you miss out on the savings.
  • If you decide to change banks, sell your home, or pay off your loan within the fixed period, you may be charged an early payout cost.

Variable interest rate loans

  • Usually give you more features and flexibility, such as the ability to make extra repayments, or the ability to pay off or move your loan without incurring an early payout cost (although you may pay a discharge fee).
  • Are subject to market conditions. If rates fall, it’s likely your variable rate will also fall, and your loan repayments will decrease. Similarly, if rates rise, so might your repayments.
What are split loans?

Some customers choose to split their loans. A split loan is when the loan balance is split across multiple products. For example, some customers like a fixed rate portion (where they know what the repayment will be each month) and a variable rate portion (which provides the repayment flexibility –ability to make extra repayments, redraw etc)

Understanding loan features

  • Extra repayments
  • Redraw
  • Offset accounts
  • Comparison rate
Ability to make extra repayments
  • Allows you to pay more than the contracted or minimum loan repayment amount. For example, if your monthly repayment is $2300, you may decide to pay $2500 instead.
  • If you don’t redraw your extra repayments, it will help you to pay off the loan faster and save on your interest payments.
  • Also allows you to make lump-sum payments, such as when you receive a bonus from work.
  • You may be able to redraw your extra repayments if you have unexpected expenses or bills.
  • This feature provides access to the extra repayments you’ve made on your loan.
  • You can take out (redraw) money from your ‘repayments in advance’ or ‘redraw balance’ whenever you need to, which can come in handy, especially if you have unexpected expenses or bills.
Offset accounts
  • An offset account is suitable for customers who have surplus cash to hold in the account.
  • As it’s a transaction account linked to your home loan, you can use it the exact same way as you would your normal everyday account.
  • What offset actually means:  If you have a loan of $500,000 and a balance of $50,000 in your offset account/s, you’ll only pay interest on $450,000 instead of $500,000 (i.e. your loan is offset by the balance in the offset account).
  • At Great Southern Bank, you need to have a $500 minimum balance requirement in your offset account for the offset benefit to commence.
  • Hint! When considering an offset account, you should consider how much you are going to have in it. Offset home loans attract a higher interest rate so customers with lower transaction balances may be better off with a basic product with extra repayment and redraw features.
Other considerations
  • When comparing loans, always look at the comparison rate. While one loan may have a lower interest rate, it may have fees and charges which make it more expensive.
  • The comparison rate will help you to compare the overall cost of each loan. Always check these for fixed rates, home loan packages and intro rates!
  • In Australia, comparison rates are always calculated on a standard loan amount of $150,000 and a loan term of 25 years with monthly repayments.
  • Although a useful guide, the comparison rate calculation doesn’t include benefits like offset accounts or the ability to make extra repayments, and some fees may be excluded.
Choose your own home loan
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Important Information

Please note that this is only intended as a general guide in relation to issues you may want to consider when buying your first home. It is not intended to be an exhaustive list of all relevant issues and you should take into account your own particular circumstances, and obtain independent expert advice where needed, before proceeding. Rates and savings quoted are indicative only for illustrative purposes.