Expert advice

First homebuyers column
Publication: The Sunday Times HOME magazine
Date: 18 January 2009

Buying your first home will arguably be one of the most thrilling and rewarding experiences of your life. It can also be daunting, complex and confusing. Even knowing where to get started sometimes poses a challenge. Don Crellin, general manager of Resolve Financial Solutions, sheds some light on the three most commonly asked questions concerning the purchase of a first home.

1. How much deposit do I need?

As a general rule, owner-occupiers require 5 per cent of the purchase price for a loan deposit. However, this percentage can vary depending on the type of loan, the borrower's personal circumstances and the type of property they plan to purchase.

Another option is a 'no deposit home loan', where up to 100 per cent of the property purchase price is provided to first homebuyers to help them enter the market.

Combined with some of the Government's first homebuyer concessions, this means in some cases that borrowers can buy their first home without having to save for a deposit.

2. What other types of home loans are available for first homebuyers?

Most home loans are categorised into either fixed or variable-rate loans. Fixed rate loans are great for people who like the certainty of set monthly repayments because the rate is fixed for the term of the loan. Variable rate loans, on the other hand, offer more flexibility but the amount of interest owing changes according to market conditions. A common thing to do is to split the home loan to take advantage of the flexibility of a variable rate and the certainty of a fixed rate.

A Keystart home loan is another alternative for first homebuyers. It is an initiative of the WA Government that offers low-deposit lending to encourage home ownership.

Having a guarantor, generally a family member, is another potential way to secure a loan because they use the equity in their home as additional security for a portion of the loan amount.

3. How much can I borrow?

Your borrowing capacity or borrowing power will depend on a number of factors including your current income, monthly expenditure and existing assets and liabilities. Based on this information, the lender then calculates the maximum amount of money you will be able to afford to repay monthly, followed by a corresponding maximum loan amount.

Your maximum borrowing capacity will vary from lender to lender and is dependent on the individual lender's criteria.

Finally, finding the right lender and perfect loan to suit your needs should not be a complex process. All it takes is a little homework to make the dream of owning your own home a reality.