Like it or not, the move by APRA, the body that governs lending, to change the rules that allow lenders to fuel the property market will have a huge affect on your ability to buy a home.
If you are a first time buyer, you need to move fast to beat the mortgage lockdown.
The property market is still moving quickly – every city recorded an 80 per cent clearance rate last weekend.
But most importantly, you need to lock in a loan.
There are many different types of home loans available and each type has its own characteristics. It’s important to know what you are getting yourself into before applying for any home loan – so read on to find out how to get the cheapest home loan in Australia.
The number one way is to put down a large deposit when buying your property. And that’s what the new rules are about, ensuring that you only borrow a multiple of your income that is safe.
Recently, lenders have been prepared to offer six times your income. Now, they are down to four times.
You want a million dollar house? On a regular 20% deposit, you would have needed a $134,000 per annum income before the new APRA rules. Now you’ll need $2oo,000.
Put down a bigger deposit and you can reduce that.
Or you can take out Lenders Mortgage Insurance which protects the lender from your default. It makes a big different to deposits, as you can see from the below table on a $1 million home:
Source: Quotes taken from Genworth LMI premium calculator, correct as at May, 2021. Premiums listed are for first home buyers (owner occupiers) borrowing with a loan term of up to 30 years and excluding stamp duty.
If you have not got enough funds then consider getting a home loan with an offset account.
An offset account is where you get two home loans, one for the home that you are living in and one for your deposit or savings.
You can’t make any more withdrawals from this home loan, however it will reduce the interest rate of the home loan because there is less of a risk to the bank if you default on payments. This makes it easier for anyone who doesn’t have enough money saved up to still get a cheap home loan rate.
Another way to get a low interest rate on your home loan is by working with certain employers. If you work at Google, for instance, banks see this as an added bonus when looking at approving your application because they know that if you lose your job with them you have a vast range of other options open to you. Best of all, many employers in this bracket offer home loans for their staff, so it can be a simple process if you are employed with one of these companies.
Lastly, another way to get a cheap home loan and get that loan amount down is through proper research and shopping around.
If you already have an account with a home loan bank then they will usually match or beat any rates that you find elsewhere. Not only that but banks also like to compete against each other by offering promotions such as waiving application fees and free insurance premiums amongst others.
Still confused about home loans? Read our FAQs on finding the cheapest home loans in Australia.
FAQ’s on Cheap Home Loans:
– What is a home loan?
A home loan is a long term loan which allows home buyers to purchase houses and other real estate properties with low interest rates and monthly or fortnightly repayments over a predetermined period of time usually at least 30 years. The banks will provide this funding if you put down a deposit (typically 20%) plus the cost of stamp duty (if applicable in your state/territory) and other home loan related expenses.
– What is an offset home loan?
An offset home loan, also known as a home loan with an offset account or redraw facility is a home loans that lets you to have two home loans at the same time – one for your home which you live in and another for your deposit or savings. You can only make withdrawals from the home loan for your home however it does allow you to reduce your interest rate because there is less of a risk to the bank if you default on payments. This makes it easier for anyone who doesn’t have enough money saved up to still get a cheap home loan rate.
– How do I find out my credit score?
Your credit score can be found from a number of companies or service providers such as Veda Advantage, Dun and Bradstreet and Experian. This is a system that most home loan lenders use to assess how likely you are to pay back your home loan on time so it is important to seek yours out.
– Who offers home loans with no application fee?
HSBC home loans, RAMS home loans and AMEX home loans are among many that offer home loans with no application fees. Your bank will usually match or beat the home loan rates of these providers if you have an account with them so it can save you time and money! Search for home loan discounts today.
– How long do home loan approvals take?
Home loan approvals can vary depending on the service you are using to apply for your home loan. If it is through a home loan broker then they have an approval within 1 business day however if you are applying directly with a home loan bank then it may take up to four weeks so please keep this in mind if you have a home loan due date coming up soon.
– What is interest?
Interest is a fee that some lenders charge you when you borrow money to help cover the cost of borrowing it. Interest rates can be found on home loans, personal loans and credit card home loan rates.
– Who can get home loan discounts?
Anyone who is looking to apply for a home loan will need to speak with their home loan provider or home loan broker before they apply so that they can get home loan discounts and home loan deals. This way they will be able to get home loan rates Australia has to offer without any hassle.
– What is home insurance?
Home insurance protects you if your home gets damaged by any natural disaster such as fire, flood or storm. It also helps protect you from theft that may occur in your home.
– What is a fixed interest rate?
A home loan with a fixed interest rate means that the home loan repayments will stay the same for the duration of your home loan.
– What does home insurance cover?
Home insurance covers you if there is any damage to your home from a natural disaster such as fire, flood or storm. It also helps protect your home from theft occurring in your home.
– What is a home loan credit rating?
A home loan credit rating is when a lender checks the credit report of an individual to find out how likely they are to repay their home loan.
– How do home loan interest rates compare?
To find home loan rates Australia has to offer it is best to compare home loans with home loan comparison websites or you can speak with a home loan broker. These are the best ways to find home loan deals and home loan discounts in order for you to get home loans with no application fees, low interest home loan rates and home loan discounts. You can always check home repayment calculators to see what monthly repayments you will be paying back.
– How do I compare home loans?
The best way to compare home loans and ongoing fees in Australia is by using a home loan comparison website or home loan broker. You can also speak with your home bank for their home loan deals available. Comparing home loans is a great way to find home loan rates Australia has to offer at home loan providers.
– How do home loan brokers work?
A home loan broker works not by giving you financial advice by helping you compare home loans from different home loan providers, this way they will help you find home loans with low interest home loan rates and no application fees. They can also help you get home loan discounts to make home loans even more affordable.
– What is home loan insurance?
A home loan insurance protects you if your home gets damaged by any natural disaster such as fire, flood or storm. It also helps protect your home from theft occurring in your home.
– Why are home loans interest always higher than the cash rate?
This is because home loans are long-term debts which means that they have to be repaid over a very long time, therefore the home loan provider charges you more for borrowing money for an extended period of time past one year. This is why it costs more compared to short term debt which only has to be paid back within one year.
– What is home loan interest?
Home loan interest is the amount of money charged to home owners by home loan providers for borrowing their home loans. This is calculated as a percentage of your home’s value each year on your home’s balance. This can change depending on home loan deals and home loan deals that are available at the time.
– How do you compare home loans with different introductory or special offers rates?
To compare home loans with different introductory rates it best to speak to experienced lenders who offer many types of home loan deals, this way they will know which deals suit you best based on your individual needs. You can find experienced lenders through our network or by speaking to your current lender if they offer special deals beyond what is advertised on their home loans home page.
– How do home loan brokers make money?
A home loan broker makes money by getting home loan deals for their customers, this can be home loan discounts or home loans with no application fees. They also receive commission from home loan providers in order to get you approved for a home loan.
– How long does home loan approval take?
Home loan approval can take between 24 hours to 1 week depending on how quickly you get your finances in order for home loan providers, this includes income statements and other documentation. This process is generally very fast if home loan brokers are involved to help get home loans approved as soon as possible.
– What is home owner’s warranty insurance?
A home owner’s warranty insurance provides cover at a relatively low cost for home owners in case of any accidents that occur during your home ownership tenure. It covers damage to the structure of your home or fixtures found at both the exterior and interior of your home. You can speak with experienced lenders to find home owner’s warranty insurances that suit you best when home home buying.
– What happens if the interest rates go up after signing a home loan agreement?
Home loan agreements usually include clauses saying that interest rates can increase during your tenure as a borrower. These changes in interest rates cannot occur within the first five years though otherwise the home owner’s warranty insurer has the right to cancel their insurance policy on your home giving you ample time to find another insurance provider.
– Can I get a low interest rate if I buy an affordable property?
You can definitely get a low interest rate for an affordable property but it may take some time to find the lowest available rates and a repayment type that will suit your needs best.
– Can I get a low interest rate if I have bad credit?
Of course you can still get a low interest rate, especially for smaller loans below $100,000 or with boutique lenders who specialise in these types of home loans – the main thing is to speak with an experienced lender who can help you find the best deals available with banks and financial institutions!
– What does mortgage protection cover?
Mortgage protection covers your existing debts in case anything happens to you while you’re paying off your home loan (such as cancer or some other major illness) which would make it impossible for you to pay off home home loans.
– Can I get a low interest rate if I have multiple credit defaults?
You can still get a low interest rate for small home loans under $100,000 or even larger ones – it just takes time and patience to find the lowest available rates in Australia
– What is the process of applying for a home loan?
To apply for a home loan you need to go through an assessment process where the bank will assess what kind of loan deals they can offer you based on your income, assets and liabilities. After this initial appraisal of your situation, they’ll let you know if you qualify for any loans