If you’re buying your first home, you’ve probably been saving for a while to get your deposit together.
Depending on how successful you’ve been, you’ll have saved either 20% or at the very least 10%, which will determine the type of home loan you’ll be able to get.
If you’ve only managed to save 10% of the property’s value, you’ll be required to take out Lenders Mortgage Insurance (LMI). This can be quite expensive, so it’s best to try and save a 20% deposit if you can.
The type of loan you then opt for will depend on your circumstances, but most first home buyers go for a principal and interest loan, where you pay off the loan amount with interest.
Many also choose a variable interest rate loan, as this usually comes with features that can help you to pay the loan off quicker.
Some people do opt for a fixed rate loan and the advantage of this is you always know how much your repayments will be, allowing you to stay on top of your budget, particularly if it is tight.
Whichever type of loan you opt for as a first home buyer, consider having the lowest interest rate you can get, the shortest loan term you can afford, minimum fees and only those features you’re likely to use such as a redraw facility and offset account. You should also get professional financial advice to better understand your options.
Home Loan Guide