Buying your next home
Financing a new principal place of residence, whether you are moving, upsizing, downsizing or changing location.
Property Finance
Home Loans
Buying a home involves more than finding the lowest advertised interest rate. The right loan should also suit your deposit, borrowing capacity, repayment strategy and plans for the years ahead.
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Finding a home loan that fits your situation
A home loan is usually one of the largest financial commitments a person will make. While interest rate is important, the overall loan structure, lender policy, fees, features and repayment strategy can all affect the outcome.
Different lenders can assess the same borrower differently. The amount you may be able to borrow, the deposit required and the interest rate available can vary depending on your income, expenses, employment, property, existing debts and loan-to-value ratio.
The aim is not simply to obtain an approval. It is to put together a loan structure that is appropriate for both the purchase and your longer-term circumstances.
Who might need a home loan?
Home lending can involve very different circumstances, even where the property itself appears similar.
First home buyers
Purchasing your first property and understanding deposits, government schemes, lender requirements and upfront costs.
Existing homeowners
Reviewing an existing mortgage, restructuring lending or considering whether refinancing may improve the current position.
Property investors
Financing an investment property where lending policy, cash flow and loan structure may differ from owner-occupied lending.
Building or renovating
Funding construction or major renovation works where progress payments and additional lending requirements may apply.
Buying before selling
Using bridging finance where an incoming property needs to be purchased before the outgoing property has been sold.
What determines how much you may be able to borrow?
Borrowing capacity is not based on income alone. Lenders look at the overall financial position and apply their own assessment rules.
Income
Salary, wages, business income, rental income and other acceptable income may be considered depending on the lender.
Living expenses
Household and ongoing living expenses form part of the lender's serviceability assessment.
Existing debts
Credit cards, personal loans, car finance, HECS or HELP debt and other commitments may reduce borrowing capacity.
Dependants
The number of people financially dependent on the borrowers can affect the lender's assessment.
Interest-rate buffers
Lenders generally assess repayments at a higher rate than the actual loan rate to allow for potential increases.
Lender policy
Different lenders can produce different borrowing outcomes from exactly the same financial information.
How much deposit do you need?
The deposit required depends on the purchase price, available savings, loan-to-value ratio, lender policy and whether any government support or guarantee scheme is available.
A larger deposit can reduce the amount borrowed and may improve the range of lending options available. A smaller deposit does not necessarily prevent someone from purchasing, but additional costs or lending restrictions may apply.
It is also important to allow for purchase costs rather than using every available dollar as the deposit.
Costs to allow for when buying a property
The purchase price is only one part of the amount required to complete a property purchase.
Deposit
The contribution you provide towards the purchase rather than borrowing from the lender.
Stamp duty
State or territory transfer duty may apply, although concessions or exemptions may be available in some circumstances.
Legal and conveyancing costs
A solicitor or conveyancer will usually assist with the contract, settlement and property transfer.
Building and pest inspections
Depending on the property and transaction, inspections may help identify issues before the purchase becomes unconditional.
Lender costs
Application, valuation, settlement or other lender charges may apply depending on the product.
Lenders mortgage insurance
Where the loan-to-value ratio is above certain levels, lenders mortgage insurance may apply depending on the lender and transaction.
Interest rate is important — but it is not the whole loan
It is easy to compare home loans by looking only at the advertised interest rate, but two loans with similar rates can produce different outcomes.
Fees, offset accounts, repayment flexibility, fixed and variable options, loan term, lender policy and the ability to restructure later can all affect the overall value of the loan.
A very low advertised rate may also have conditions attached or may not be available for every borrower or property.
Features worth comparing
Not every borrower needs every feature. The useful features are the ones that match how you intend to manage the loan.
Offset account
Money held in an eligible offset account may reduce the balance on which home loan interest is calculated.
Redraw
Some loans allow eligible extra repayments to be accessed again later, subject to the lender's terms.
Extra repayments
The ability to repay more than the minimum can help reduce the loan balance and interest over time.
Fixed and variable splits
A loan may sometimes be divided between fixed and variable portions depending on the borrower's objectives.
Repayment frequency
Weekly, fortnightly or monthly repayment options may be available depending on the lender.
Package and annual fees
Loan features should be weighed against any ongoing fees charged for the package or product.
Fixed or variable interest rate?
Neither option is automatically better. The choice depends on your priorities and how much flexibility you require.
Variable rate
The rate can move over time, but variable loans commonly provide greater repayment flexibility and may include offset or redraw features.
Fixed rate
Fixing may provide certainty over repayments for an agreed period, but restrictions can apply to additional repayments, refinancing or early repayment.
Split loan
Some borrowers choose to split the loan between fixed and variable portions to combine repayment certainty with some flexibility.
Consider future plans
Plans to sell, refinance, renovate or make substantial additional repayments may influence whether fixing part or all of the loan is appropriate.
Choosing the loan term
A longer loan term generally reduces the required monthly repayment because the debt is spread over more years. However, keeping the loan for longer can substantially increase the total interest paid.
A shorter term generally requires higher repayments but may reduce the amount of interest paid over the life of the loan.
The loan term should therefore be considered alongside affordability rather than simply selecting the longest term available.
What will a lender usually assess?
A home loan application involves both the borrowers and the property being offered as security.
Income and employment
The lender will usually verify income and review the stability and type of employment or business income.
Expenses and commitments
Existing debts and household expenses are considered when assessing the ability to repay the proposed loan.
Credit history
Credit enquiries, repayment conduct and other credit information may form part of the assessment.
Deposit and genuine savings
Depending on the transaction, the lender may review the source and history of the funds being contributed.
Property
The property type, location, value and marketability can influence whether a lender will accept it as security.
Loan-to-value ratio
The amount borrowed compared with the property value can affect pricing, policy and whether lenders mortgage insurance may apply.
Why lender selection matters
Banks and non-bank lenders do not all assess home loans in the same way.
Borrowing capacity
Different serviceability models can produce materially different borrowing limits.
Income policy
Overtime, bonuses, commissions, business income and rental income may be treated differently between lenders.
Property policy
Some lenders may restrict certain property types, locations or characteristics.
Interest-rate pricing
Available pricing may depend on the loan amount, loan-to-value ratio and borrower profile.
Credit policy
Existing liabilities, credit history and other circumstances may be assessed differently.
Features and flexibility
Offset accounts, redraw, fixed-rate options and other features vary between lenders and products.
How I compare home loans
My role as a mortgage and finance broker is to compare realistic lending options based on your circumstances rather than simply directing you towards one advertised rate.
That means considering borrowing capacity, deposit, lender policy, interest rate, fees, loan structure, useful features and how the proposed loan fits with your future plans.
Sometimes the most suitable lender is not the lender with the lowest headline rate.
A typical home loan journey
The exact process varies depending on the lender and transaction, but a home purchase will commonly involve these stages.
- 1
Understand your position
Review income, expenses, debts, available deposit and what you are hoping to purchase.
- 2
Estimate borrowing capacity
Assess what may be affordable and which lenders are likely to suit the circumstances.
- 3
Compare loan options
Review lender policy, rates, fees, features and loan structure.
- 4
Pre-approval where appropriate
A lender may provide conditional approval before a particular property has been selected, subject to its requirements.
- 5
Find the property
Once a suitable property is identified, review the contract and ensure the finance and settlement timeframes are understood.
- 6
Formal approval and valuation
The lender completes its assessment, including any required property valuation and documentation.
- 7
Settlement
Once all conditions are satisfied, the loan settles and ownership of the property is transferred.
Home loan questions
How much can I borrow for a home?
Borrowing capacity depends on income, expenses, debts, dependants, interest-rate assessment buffers and lender policy. Different lenders can produce different results from the same financial position.
How much deposit do I need?
The required deposit depends on the property value, loan-to-value ratio, lender policy and whether any eligible government scheme or guarantee applies.
What is lenders mortgage insurance?
Lenders mortgage insurance may apply where the amount borrowed is high relative to the property value. It generally protects the lender rather than the borrower.
Should I choose a fixed or variable rate?
The choice depends on factors such as repayment certainty, flexibility, future plans and the features you require. Some borrowers choose a combination of fixed and variable lending.
What is an offset account?
An eligible offset account is linked to the home loan. The balance held in the offset account may reduce the amount of the loan on which interest is calculated.
Does the lowest home loan rate always mean the best loan?
No. Fees, features, lender policy, loan term and the way the loan fits your circumstances can all affect the overall outcome.
What is home loan pre-approval?
Pre-approval is generally a conditional indication from a lender that it may be prepared to lend up to a particular amount, subject to its conditions and final assessment.
Will the lender value the property?
A lender may obtain a property valuation as part of the approval process. The valuation method can vary depending on the lender, property and transaction.
Can I make extra repayments?
Many variable-rate loans allow additional repayments. Fixed-rate loans may impose limits or conditions, so the product terms should be checked.
How long does home loan approval take?
Timeframes vary between lenders and depend on the complexity of the application, documentation, valuation and whether additional information is required.