Understanding home loans
Buying your very first home can be such an exciting and yet stressful time. There are so many things to consider and you may find yourself feeling overwhelmed with such a big financial commitment.
At Westpac, our Home Finance Managers are available to guide you each step of the way from helpful tips for saving your deposit, understanding how much you can borrow and what your repayments could be, things to consider when looking for a property, next steps once you have found the one, and what to expect during the settlement process.
Read on for some information to help you work out where to start.
Are you tired of renting and want your own space or do you want an investment property to gain a foothold in the property market?
Research is critical to help you choose the right property. Things like location, affordability, rental attractiveness, and suburb amenities will all impact your decision.
There are a variety of tools to help you research the market. Whether you want to gain a broad overview of an area or look at a specific property, we have information available to help you, in our Seasonal Buying Guides, Suburb Reports and Property Reports. You can also speak to our Home Finance Managers to help you get started.
There’s a lot of jargon you’ll hear as you start looking so we’ve put together a few of the key terms you’re likely to come across.
Contract for Sale
This is the legal document that sets out the terms and conditions agreed between the buyer and the seller. You should ensure both you and your solicitor or conveyancer review this before purchasing.
This is generally a summary of the Strata records for a property which is a Strata titled property, such as an apartment, villa or townhouses. This is an important report to become familiar with as it could highlight some issues that may exist with the property.
A state and territory government tax based on the purchase price of the property. As it’s paid to the state or territory, the amount will vary depending on where you’re located as well as on the price of the property and other factors such as whether you’re a first home buyer or an investor. This is often a significant cost, so it’s vital you budget for it. Westpac’s upfront costs calculator can give you an indication of how much stamp duty you could have to pay.
A tool to help customers identify the true cost of a loan and compare it with other loans from different lenders. It is represented by a single percentage rate which factors in the interest rate, fees and charges relating to the loan.
Fixed Interest Rate
An interest rate that does not change for a set period of time. You can choose the period you want to fix the interest rate, which is generally up to 5 years. This type of interest rate may suit borrowers who would like certainty with their regular repayments throughout the fixed term.
Variable Interest Rate
An interest rate which moves in response to market interest rate changes. This means your repayments could change during your loan term. The rate can increase or decrease throughout the loan so you may need to be prepared to make higher repayments if the rate goes up or lower repayments when the interest rate falls. Many first time home buyers may choose a combination of Fixed and Variable components for their Home Loan which combines the flexibility of a variable interest rate and certainty of a fixed interest rate.
An offset account is a transaction account linked to your home loan account. Any money in the transaction account will help reduce the interest charged on your home loan account. This means you only have to pay interest on the difference between these account balances, which could save you thousands on interest payments and cut years off the life of your home loan.
When applying for Home and Contents or Building Insurance, you’ll be asked to nominate a ‘sum insured’. For Building Insurance, this sum will be shown on your policy schedule and should be able to cover the reasonable costs to rebuild your home. For Home and Contents Insurance, the sum insured should be able to cover the costs of replacing your home and contents, along with your valuable items. Check the full list of coverage types and insured events with your insurer.
See our additional Glossary Of Terms to help understand the financial terminology you may encounter when buying your home.
Things you should know
Credit criteria, fees, charges, terms and conditions apply. This information has been prepared without taking your objectives, needs and overall financial situation into account. For this reason, you should consider the appropriateness of the information and, if necessary, seek appropriate professional advice.
Property Reports and Guides: While such material is published with permission, Westpac is not responsible for its accuracy or completeness.