First Home buyer, loan advice

Hi everyone,

Me and my wife (both fulltime) are looking to buy our first home in the next few months. At the moment we are doing some research, reading, meeting banks etc.

We are looking to buy established with an available deposit of 180k, and looking to borrow 400k - 440k.

I have read a few posts on this forum and just after some guide to good interest rate figures, banks, broker/no broker

We are looking for a 20yr loan period, comfortable repayments of 500-600 p/w with option to pay extra (10k a year roughly)

The fixed 4year periods appear good but will we be stung with a high variable at the end of this?

Any advice / experience will be appreciated

 

Hi,
Rather than meeting with different banks, why not use a Mortgage Broker who has access to all banks? Most operate their business at no charge to you the borrower.
I would suggest you opt for a 30 year loan term for flexibility purposes - things change, job losses etc, you could still aim to pay off the loan within that 20 year time frame by making additional repayments for example.
Also assists with Borrowing Capacity if you ever want to buy an investment property or borrow additional funds for other purposes in the future.
You could go part variable and part fixed rate to allow you to pay as much additional off the variable portion as you like, best of both worlds.
Although most fixed rate products do allow you to pay additional funds up to $10K (some lenders allow more)
With a good broker you can have a discount applied so the end of the fixed rate period you're not stuck with a higher interest rate.
Suggest using a broker to show you the different options and outcomes for the different structures.

 

Good plan, i think you are such good customers that banks will be fine for you to work with. I am not sure that a broker adds much.

Brokers seem to have good value if your outside the 'norm' or there is something else that might be deemed less attractive to a bank. They can get you over the line. But you guys are fine.

I recently tried a 'broker' and found that it was better if i went to the bank. The broker was slow and disinterested. On the GC right in the middle of the pandemic. I think perhaps he was distracted (which is fine).

Interest rate (why not fix?) loan costs, your perception of the bank, and pick one you are happy with!! Don't overthink it, across the board there are good rates.

.... and good luck

 

choice.com.au has some interesting info including what to watch out for and who has recently been referred to ASIC for misleading conduct :-(

 

Brokers are bound by Best Intertest Duty - meaning they are required to act in the clients best interest at all times (regularly audited to ensure they have too) - Banks are not bound by any such thing.

Don't let one person's bad experience influence your decision to potentially be worse off financially.

A Broker has access to over 30 lenders, you go direct you risk not knowing what other options are out there.

As with any profession, there are good and bad eggs

Some interesting notes from AFCA (Australian Financial Complaints Authority)
'Looking at complaints by channel, brokers made up a very small proportion of consumer complaints, even in light of an increase in overall complaints made to AFCA.
With 53 complaints in the eight-month reporting window, mortgage brokers made up just 0.1 per cent of total AFCA complaints filed in the data period, and 0.23 per cent of the banking and finance complaints that were accepted and progressed.
In comparison, banks (excluding mutuals, credit unions and non-bank lenders) received 16,214 initial complaints, making up 36.0 per cent of total complaints to the body during the reporting period.'

You have a choice, choose wisely.

 

Thanks everyone, we are meeting with a broker on friday to discuss options and are very keen to discuss options. He has been recommended to us so hopefully he is good.

Considering our goals to have steady repayments and pay off abit extra a year i think a low variable may be the best option long-term. The fixed rates are nice for 4 years but don't want to get stung with a higher rate for the majority of the loan after.

Appreciate all your advise we are just treading carefully as it is our first time

 

A variable / fixed split loan would address the need to be able to make extra repayments.

Whilst many lenders will put your loan to a high rate after the fixed period by default, simply call your broker and ask them to get the loan repriced. You should really do this every year or so for any sort of loan, not just old fixed loans.

And I completely agree with Lindsay. Legitimate complaints are overwhemingly about the banks themselves, not brokers. choice.com.au is incredibly bias against brokers. They once tried to compete with brokers and failed completely. Almost everything they write is one sided and omits many facts which are easily verifiable.

 

As mentioned above - might be best to go with a 30 year term and manipulate the repayments to achieve whatever term you'd like (add more to the offset/loan each month to reduce the term). Best to have that flexibility now - rather than locking yourself into a higher ongoing repayment for the life of the loan.

Having said that - some borrowers may feel that they lack discipline with money and a reduced term is a forced way to save.

Cheers

Jamie

 

A banker can you give 1 loan product, a broker csn give you 1..2..3..up to 30 products. Therefore they are able yo give you a good comparison with whats offered in the market.

What you're asking needs a better indepth discussion.

 

I've relied on Choice.com.au a lot in the past. You've now made me question it.

 

You'd think that as brokers advocate for consumers and have an extordinarily low number of complaints, that Choice would support the industry. But try to find anything positive from them about the industry. They clearly have a bias. From where I sit most of their comentary on home loans could be defined as 'uninformed'.

Years ago they ran their 'one big switch' campain for home loans. They set themselves up with a credit license, put tenders out to various lenders and they were going to get paid commissions from those lenders. They had something like 40,000 enquiries. Out of that they wrote a tiny number of loans, mostly with lenders you've probably never heard of. The rates offered weren't anything particularly special and given the lender profiles, the borrowers are likely paying far to much today.