Learn from the experiences of other first home buyers and see how you can pay your loan off faster with these case studies.
Primary school teacher Lachlan and his wife Lucy were looking to get into the property market. As a young couple, happily living in the inner suburbs of Melbourne, they chose to purchase an investment property that wouldn’t overextend them financially.
Lachlan, already a Member with Victoria Teachers Mutual Bank, chose the Mutual Bank for their home loan because of its support of education and competitive home loan interest rates.
With their eye on a property to purchase, Lachlan and Lucy spoke to Victoria Teachers Mutual Bank Mobile Lender, Jason Butcher, to arrange pre-approval for their loan.
“Jason guided us through the application process and made sure we understood all the little things you need to remember when purchasing a property, such as making sure the contract was ‘subject to finance’ and having a conveyancer review the contacts before we made our offer,” said Lachlan.
“It all happened really quickly for us as we were successful in purchasing the property only a couple of days after making an offer and had a short settlement period. Jason was fantastic in organising our loan – especially with such a tight timeframe. We emailed and spoke to him over the phone whenever we needed to as well which was really convenient.”
After discussions with Jason, they took up a Discounted Rewards Rate Home Loan with a variable interest rate.
Lachlan and Lucy also decided to take out CGU Home and Contents insurance through the Mutual Bank, impressed with their comprehensive cover and free cover until settlement. “You hear so many stories about insurance claims not being paid so we did our research on insurers as that wasn’t a risk we were willing to take,” said Lucy.
So how’s life now as first home owners? “It’s hard work as we are slowly renovating the house, but it’s been so rewarding making it all come together.”
When it comes to buying your first home, remember that you’re not alone. Seek support from family, friends and the home loan professionals at your bank.
Here are tips from real first home buyers so you can learn from their experiences:
Wherever possible, make your contract 'subject to finance'
Get everything in writing and never just verbal agreements. This is especially important if you are using a builder.
A paper trail means that everyone will understand the situation and requirements.
Don’t be intimidated by big crowds at an auction. Most of them are likely to be just onlookers and not potential buyers.
Just because you have pre approval for a high amount, doesn't mean you should borrow/ spend your maximum limit.
Know what you are getting into and if you can afford the repayments, taking your living expenses into consideration.
Don’t forget to insure the property – and yourself!
Buying your first home is likely to mean a big change to your normal expenses and financial commitments.
I found it helpful to get into good money management habits for all of my financial matters, not just my loan repayments.
There are plenty of resources on the ASIC MoneySmart website which are really helpful for this.
Don’t be scared to ask the real estate agent lots of questions – information is power when it comes to making a smart purchase decision.
Take a look at the difference making fortnightly rather than monthly repayments can make to the term of your home loan and the interest paid:
|Repayment frequency||Repayment amount||Total annual repayments|
($2000 * 12 months)
($2000/2 fortnights a month)
($1000 * 26 fortnights)
The value in this strategy is the overly simplified math. We estimate that there are two fortnights in a month, when in fact there are slightly more days than this. The slight increase in repayments over the course of the year isn’t likely to have a negative impact on your everyday expenses, but it can make a big difference to your loan repayments over the long term.
Figures calculated based on a loan amount of $300,000, an interest rate of 4.24% p.a. and no annual fees. Figures are in today’s dollars, rely on assumptions and are estimates only. Calculations were made using the ASIC MoneySmart ‘Mortgage calculator’. Refer to the MoneySmart website for the full range of disclaimers and assumptions: https://www.moneysmart.gov.au/tools-and-resources/calculators-and-apps/mortgage-calculator#!how-can-i-repay-my-loan-sooner.
An Offset account is a transaction account that can be linked to your home loan. It gives you the ability to use your savings to reduce the interest payable on your loan.
The credit balance of your Offset transaction account is offset daily against your outstanding loan balance, reducing the interest payable.
See the example below which shows how an Offset account reduces the interest payable by $621 p.a.
|Your Home Loan||With Offset||Without Offset|
|Home Loan Balance||$350,000||$350,000|
|Offset Account Balance||$15,000||n/a|
|Home Loan Balance for interest calculation||$335,000||$350,000|
|Variable interest rate (p.a.)||4.14%||4.14%|
|Interest payable (p.a.)||$13,869||$14,490|
|Interest reduced by (p.a.)||$621||-|
Please note that the net interest will vary depending on the daily loan and Offset account balances. This example assumes there is no change to the loan or Offset balances or the variable interest rate over a 12 month period.
Offset is not available during fixed interest rate periods. When you link a transaction account to an Offset facility, you earn no interest under the transaction account even if the balance of the transaction account exceeds the loan balance.
Speak to one of our friendly Home Loan Consultants on 1300 654 822 to find out more.
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