The home buying process can be stressful from beginning to end. From choosing your new home to dealing with real estate salespeople, there are dozens of decisions to make and things to consider. Perhaps the most stressful part of the process is making decisions about financing your new home. Though the greatest difference between mortgage types is the dichotomy of fixed and variable rates, there are numerous specialised products like first home owners grant in australia designed for particular circumstances. Though first time buyers might not need all of them, it’s important to know the details when you’re completing research. If you’re asking the question, “Which home loan is right for me?”, we’ll help you answer that question as we provide a guide to some of the most common specialist products.
Designed specifically for first time homebuyers, honeymoon loans are a popular option for financing your new home. They’re called honeymoon loans because you pay a discounted interest rate for an initial period of time, usually 12 months. Some lenders, however, only offer the low rate for six months, while others extend it for three or four years. The introductory rate can either be a fixed discount or a discounted fixed rate. With a fixed discount rate, the rate will move with the market for the introductory period. Conversely, a discounted fixed rate stays the same for the entire introductory period.
This is an option for financing your new home only if you’re building from the ground up. Because you don’t need the entire amount of the loan all at once, a construction loan lets you break up the drawdown of the amount into five progressive draws, paralleling the five construction phases: purchase of the land, flooring, roof and frames, lock up, and finalisation. Interest is only calculated on the amount which has been drawn down, and repayments are only made on the portions that have been used.
Many major lenders offer special packages for borrowers taking $250,000 or higher, though some discounts are available for amounts as low as $100,000. A pro pack usually includes interest rate discounts on variable rate loans, up to four credit cards with no annual fee, free or discounted offset and savings accounts, discount on insurances, and fee waivers or reductions on valuations, top ups, and switches. If you’re financing your new home which costs more than $250,000 this might be an option.
Low Doc Loans
Low doc lenders don’t require traditional proof of income, instead requiring borrowers to complete a declaration that they can afford the loan through a process called self certification. Generally, they’re used by self employed persons or full time investors who struggle to show a high level income because of frequent write offs, reinvestments, or slow tax return lodging. Interest rates are often higher with low doc home loans, however, a factor that should be considered when financing your new home with a low doc loan. Continue reading here.