Deciding to buy your first property is an exciting milestone, but the amount of information out there about it can be pretty overwhelming. To make sure you’re prepared when the time is right to buy your first place, it’s important to know your way around things like home loans. With that in mind, we’ve partnered with People’s Choice Credit Union to create a simple guide to home loans.
Figure Out How Much You Can Borrow
Having a rough idea of the area in which you want to buy property and seeing the price of places around there is a good starting point. This will give you insight into how much money you’ll need to save and how much you need to borrow. It’s generally encouraged to have 20% of the purchase price put down as a deposit and then borrow the rest.
When you approach a credit union or bank to apply for a loan, they look at a couple of things to determine how much they can lend you. These include your income, savings history, and credit history. It’s important to show you have a strong record of saving cash as well as little to no debt.
On their website, People’s Choice have a super handy borrowing calculator. Put your details in and it will give you an estimate of how much you can borrow. This is a great tool to use to figure out what you can afford and what your loan repayments would be.
Fixed Interest Rate vs Variable Interest Rate
Deciding to go with a fixed rate or variable rate on your loan is a personal decision. There are pros and cons of both and choosing which one is best for you depends on your own circumstances. For example, fixed rates are better for long term budgeting, because you’ll always know how much your repayments will be. On the other hand, if rates drop, you won’t benefit.
People’s Choice have a host of different home loan options available with both a fixed and variable rate, designed to meet different needs. Furthermore, their recent CANSTAR accolades for being the 2016 First Home Buyer Customer Owned Institution of the Year in South Australia has proved to be a win for them and their members. To celebrate, People’s Choice have reduced their three-year fixed home loan rate for first time home buyers to 3.74% p.a.* (comparison rate 4.83% p.a.). Check out more on this great rate here.
It’s highly recommended to get pre-approval for a home loan before you put an offer in for a property. Getting all the money stuff out of the way beforehand means you can focus entirely on looking for your ideal place with an exact budget range in mind. This saves you time looking at properties you can’t afford. Furthermore, when you do put in an offer for a property, it puts you ahead of others. The seller would be more likely to prioritise you because they know you’ve got your finances in order already. There’s less of a risk for them as it shows you’re serious about your offer and you can get to the details of the sale quicker with the biggest factor already out of the way.
Credit Union Or Bank?
If you’re wary of big banks, a credit union is an ideal alternative. Where banks are notorious for making gargantuan profits that pay shareholders dividends, credit unions re-invest their profits in products and services to benefit their members. This means the latter has no hidden agenda when it comes to their loans, and they’re there to genuinely help. Furthermore, credit unions are member-owned, so their owners and customers are the same. Banks, on the other hand, are owned by shareholders who may not even use the bank’s services. Credit unions exist solely to benefit their members. The People Choice Credit Union’s well-deserved CANSTAR win goes to show their strong commitment to their members and customers.
*Terms, conditions, fees, charges and lending criteria apply and are available on application.*To be eligible for a Home Loan Package, you must have minimum borrowings of $150,000 and your pay must be deposited into a People’s Choice account. The comparison rate is current as at 19 August 2016 and is subject to change without notice. Home Loan Rate available for first home buyers only (each borrower on the loan must have never previously owned a residential property (either separately or jointly with another person)). Investment Loans are excluded from this offer. After the fixed period, loan reverts to applicable Variable Home Loan Package rate at the time, determined by total home lending balance. Current Variable Home Loan Package rate for $150,000 is 4.71%p.a., comparison rate 5.09%p.a. The comparison rate is based on a $150,000 loan over a 25 year term. WARNING: This comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. You should consider our Product Disclosure Statement and/or other Disclosure Documents. This information and advice is provided without reference to your personal circumstances so you should consider whether this product fits your objectives, financial situation and needs. People’s Choice Credit Union, a trading name of Australian Central Credit Union Ltd, ABN 11 087 651 125 Australian Credit Licence (244310).