Buying : Financing

FINANCING THE PROPERTY

The most common home finance lenders are:

  • Banks.
  • Building societies.
  • Insurance companies.
  • There is now a wide range of home loan products offered by lenders.
  • Comparisons of current rates and terms are included in the financial or real estate sections of major newspapers.
  • The Saturday Herald Sun magazine "Home" has an excellent guide to current home finance data.
  • The lender will need to know what your financial status is to be able to tell you how much you can borrow. They will need written evidence to support income and expense activities.
  • A loan contract must fully disclose all fees and interest to be paid.

Types of loans include:

  • Fixed.
  • Variable.
  • Combination.
  • Offset.
  • Line of credit.

Mortgages

Choosing the home loan that best suits your needs and at a competitive price can be a very confusing task. Particularly when there are so many varied options that are available in the present market.

  • It is important to be aware of all the various components of a home loan package before deciding on which lending institution.

Some points to be aware of include:

Interest Calculation Method

  • Almost all the major lenders now calculate their interest on the daily balance and charge it to the loan on a monthly-in-arrears basis, which is the cheapest method for the borrower, particularly if you wish to make weekly or fortnightly payments or periodical lump sums.
  • Check with your lender if extra or alternative payments are allowed.

Types of Loans include:

Standard Variable Rate

Fixed Rate

  • Read the fine print of any finance contract and seek independent legal advice prior to signing.

Combination

  • Many lenders will allow you to have a combination type of loan where you allocate a certain amount of the loan to be subject to a fixed interest rate and the other subject to the variable rate.
  • This is a way of hedging your position if the interest rates go up.

Mortgage Offset Accounts

  • As part of a loan package, it may be beneficial to use a "mortgage offset account".
  • Most of these special accounts work like a normal cheque savings, the balance in your account is offset on a daily basis against your home loan, thereby saving you interest on the loan and reducing the term.

Early Pay Out of Mortgage Loan

  • If you increase the payments from monthly to fortnightly it can save a considerable amount of interest and lessen the term.
  • Check with your financial institution as to how any new repayment structure may affect your mortgage and if any extra costs are involved.

Loan Repayment Calculator

  • Loan Calculator.
  • Most of the banks have loan calculators on their web sites.

Government Assistance

1st Home Buyers Grant

  • To offset the impact of the introduction of the goods and services tax (GST), the Commonwealth has requested that the States and Territories assist first home buyers through the establishment of the First Home Owner Grant (FHOG).
  • The grant is currently not means-tested nor is it restricted by the purchase price of the property. The contract to purchase an existing home or to build a new home must be signed no earlier than 1 July 2000.
  • A one-off payment of $7,000 will be payable to eligible first home buyers to help with their purchase or construction.
  • To be eligible to receive the grant, applicants must meet certain eligibility criteria.
  • Application forms are available from the State Revenue Office (SRO) and Approved Agents. Approved Agents can be found on the FHOG website at www.firsthome.vic.gov.au or www.sro.vic.gov.au
  • The broad principles of the grant are:
  • The grant assistance will not be means tested and joint applicants will be restricted to a single application for a single property and only one payment of $7,000 will be made. If the consideration of the home is less than $7000 then the grant amount paid to the applicant will equal the consideration.
  • This information is based on current data please check the above web site for any further developments or changes. With a federal election due this information is subject to change.

Stamp Duty Exemptions

  • Some purchasers may be eligible for full or partial exemptions on Victorian Government stamp duty.
  • It usually only applies to the purchase of one’s principal place of residence and strict income eligibility assessments apply.
    More information can be sourced from the State Revenue Office www.sro.vic.gov.au