Central Coast Home Loans
Generations buying property with cash has long past. Now home loans are an everyday part of the Australian dream of owning property so it’s essential that you get it right. Your Central Coast home loan broker Mint Equity reviews home loan options for buyers in Sydney and the Central Coast. We compare variable and fixed home loan interest rates and what to do before buying a property.
While the Latin origin of the word ‘mortgage’ means ‘death pledge’ or ‘debt till death’, it’s pretty rare these days that we have the same mortgage for the same property when our number is up.
Home loans are a competitive product, with banks and lenders scrambling to build their customer base. But finding the right home loan, that’s right for your lifestyle and your short, medium and long term future can be tricky.
Mint Equity, your Central Coast mortgage broker, streamlines the search, selection, application and settlement process, so all you need to worry about is finding the property. We also make sure you continue to get the right home loan through our regular reviews.
What to do before buying a property
Saving for a deposit
Before you buy a property, you’ll need a deposit of between 5% and 10% of the property price. For example, if you want to buy a house that costs $500,000 you’ll need a minimum of $25,000 of your own cash to use as a deposit. There are ways to avoid saving for a deposit and if you’ve got family or a really great friend who own their own property and have equity (amount owed to the bank is lower than the property value), they could cover/guarantee your deposit with their equity.
There are also government incentives that may help contribute to your deposit.
Costs associated with property purchases
In addition to the deposit, you’ll need cash to cover associated purchase costs like stamp duty, conveyancing/legal fees, mortgage insurance. These costs vary from state to state, so a good guide is to put aside a minimum of 5% of the purchase price.
Secure your home loan
Before going property shopping, you need to know how much you can spend. Mint Equity is able to assess your financial situation and advise you of how much you can borrow on your home loan before you go shopping. Banks and lenders credit criteria vary, but essentially the more deposit, higher income and lower expenses you have, the more you can borrow.
Get pre-approved home loan finance
One of the steps to buying your dream home is to secure pre-approved finance. Not only will you feel more comfortable knowing that the bank or lender have approved your home loan, it will enable you to make quick decisions and beat buyer competition.
Pre-approval finance is essential for auction conditions because once you buy at auction, the property is yours and if you don’t complete the purchase, you lose your deposit.
Home loan stages for buying a property
1. Search and selection
Mint Equity will research all the home loan options for you, best rates, terms, splits, equity options and what you’ll need to prepare to get your loan approved. We look beyond our Central Coast home loans database so you are presented with all the available options tailored for your finances.
2. Application submission
Send us your pay slips and supporting documentation and we’ll prepare all the forms that you need to review and sign to submit your application.
3. Pre-approval home loan
We’ll deal directly with the financial institution for you and submit your application. We’ll keep you updated every step of the way.
4. Go property shopping
Once you have pre-approved finance, you know exactly what you can spend. Say goodbye to your Saturdays, you’ll now have to find your perfect pad.
5. Make an offer
Once your offer is accepted, you normally have five (5) business days* from signing the Contract for Sale and paying 0.25% holding deposit to get unconditional approval on your loan.
6. Unconditional home loan approval
Unconditional approval means the bank is committed. Let us know straight away that you’ve signed the contract of sale and we’ll get the unconditional approval moving.
7. Pay your deposit
Now that you have unconditional approval (and not before!) – you can now pay the remaining 9.75% deposit.
We make sure all the right people talk to one another, the lender(s), solicitors, real estate agents, builders. Now you get the keys to your new home.
* Cooling off period is usually only 5 business days, however in certain circumstances you can extend this.
Variable interest home loans
Ever wondered why there is so much attention on the Reserve Bank of Australia (RBA) – well if you have a home loan on variable interest rates, you’ll care about what they have to say.
The RBA is Australia’s central bank and sets the official cash rate (OCR) for Australia. The official cash rate is the rate of interest which the central bank charges loans to commercial banks. Essentially they are they wholesaler of cash for banks and lenders.
Banks and lenders borrow money from the RBA, add a mark up to the rate, then resell the money to consumers in the form of home loans.
So, if you have a variable interest rate with your lender, each time the RBA changes the cash rate, up or down, the banks and lenders will usually pass that cost on to the consumer. This means the amount of interest you are charged for your mortgage will vary – ie ‘variable’.
There is one more factor to consider when deciding on a variable home loan, that is the banks and lenders can move their interest rates up or down without the RBA doing anything. In the past, even when the RBA makes no change to the official cash rate, banks and lenders are within their rights to put your interest rates up.
Variable interest rates for home loans are often lower than a fixed rate, because of the flexibility.
Variable interest rate pros and cons
- They are usually lower than fixed rates
- There are no break costs to end the mortgage contract if you sell or refinance your home
- You can have an offset account which means you can pay more off your mortgage, but still access that extra cash if you need to
- As you have no break costs, you have greater flexibility to refinance if you want to change lenders
- Your interest rate is dependent on economic activity and the bank/ lender’s choice to increase interest rates
- If interest rates increase your repayments will increase
- Regular review is needed to ensure you’re always getting the lowest home loan interest rate, however Mint Equity will review this regularly for clients.
Who should consider a variable interest rate home loan?
Variable home loans are great for short term borrowers, those needing flexibility or home owners who have bursts of cash flow.
One of the benefits of having a variable home loan is the ability to throw extra cash into the home loan’s offset account, which will reduce your mortgage repayments. This has the added benefit of being able to draw the money back out of the offset account when you need it.
If you think you might sell your home within a few years of purchasing it, then a variable rate home loan may suit better than a fixed rate home loan as you will not incur a break cost for paying off the home loan early (or during the fixed term).
Fixed interest rate home loans
Fixed rate home loans as the name suggests are fixed. That means, for the duration of the fixed period with your bank or lender, your interest rate and mortgage repayments will remain the same.
That means if the Reserve Bank of Australia (RBA) changes the official cash rate and your bank/ lender increases their interest rates, your mortgage payments won’t increase. On the other side, if your bank/ lender drops interest rates, you won’t get the benefit of reduced mortgage repayments.
Fixed interest rate pros and cons
- A few banks/lenders now offer offset accounts on fixed loans
- Your interest rate is set when you take out the home loan and is not affected by economic activity or the bank/ lender’s choice to increase interest rates
- If interest rates increase your repayments will not increase
- As a fixed cost it’s easier to budget your living expenses
- In times of economic uncertainty, a fixed interest rate will provide comfort knowing that your mortgage repayments won’t increase if the RBA increases the official cash rate.
- The interest rate is usually higher than variable interest rates
- You will incur break costs to end the mortgage contract if you sell or refinance your home. Break costs are calculated on the balance of the loan and time remaining.
- Offset accounts are not available on fixed interest rate home loans with the majority of lenders and there is a limit to how much extra repayments you can make each year (eg $20,000 additional repayments p/a).
- If you aren’t happy with the bank/lenders’ service it’s costly to change
Not sure where to start with your home loan?
Whether you are in the process of looking for the perfect home loan or just starting to think about buying new property, Mint Equity, your dedicated Central Coast home loan broker, can help you go in the right direction. Our experience on the job and industry knowledge allows us to provide fantastic loans for our clients, ensuring better rates and a simplified process. To be a part of one of the best Central Coast home loans service there is, give us a call today!