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Saving up

Everything you need to know about saving for a home loan.

Frequently asked questions

What type of home loan is best for a first home buyer?

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.

How much can I borrow against my salary?

Every lender has their own formula for calculating your borrowing power, and they generally look at six main factors.

  • Deposit - the larger your deposit, the more you can borrow and the less interest you’ll have to pay on your loan.
  • Income – this is not just how much your household brings in, but how much is left for home loan repayments after the bills and day-to-day expenses are paid.
  • Level of debt – how much you owe on other loans and credit card limits will also influence your available income.
  • Savings history – having a savings history of at least 3 months demonstrates to a lender that you’ll be able to manage your home loan repayments.
  • Credit rating – a sound credit rating is one of the first things lenders look at, as it is based on your borrowing and repayment history.
  • Home loan term – a lender will look more favourably at a longer loan term, but remember it will mean you pay more interest over the life of the loan.
  • Property value - a lender may conduct a valuation of your chosen property to determine the amount they are willing to lend you.

​​You can get an upfront estimate of your borrowing power with Tiimely Home by using our borrowing calculator.

Can I use the equity in my current home as a deposit?

Yes, equity is a powerful tool that can set you on the road to building a profitable investment property portfolio.

You can use the equity in your home as an investment property deposit and if you have enough equity built up, you can borrow 80% of the property’s value without having to use your own cash.

How equity is calculated

Your accessible equity is the difference between your home’s current value and how much you still owe on your home loan.

If you’ve lived in your home for five years or more, you’ve probably accumulated quite a bit of accessible equity.

But lenders will only lend up to 80% of your home’s current value minus your current mortgage. This is known as your useable equity, which is quite a bit less than your accessible equity.

But it can still be a significant amount for an investment property deposit or any other use you may have for it, such as renovating your home, investing in shares or managed funds or improving your lifestyle with a holiday or new car.

Tips when buying an investment property

  • All investments carry some level of risk, so to reduce your exposure when accessing your equity;
  • You could keep some of your equity for emergencies, instead of using it all to invest in property.
  • Consider repaying your home loan as quickly as you can.
  • Think about learning more about property investing so you can make educated choices.
  • It's always important to get professional financial advice to fully understand your options.

What is equity?

Equity is the difference between your home's market value and the amount you still owe on your home loan.

You can borrow against this equity to buy an investment property, do renovations or for any other purpose.

Two popular ways to access your home’s equity are by refinancing or by taking out an equity loan.

Refinancing

This involves replacing your existing home loan with a new one, ideally with better terms and conditions and a lower interest rate. Because it involves just one loan with ongoing repayments, it can be easier to manage than an equity loan.

Equity loan

An equity loan is a separate loan you take out in addition to your home loan. It’s often a line of credit which gives you approval to borrow up to a certain amount. You can then choose how much of this you borrow and you only pay interest on what you use.

Can I get a First Home Owner Grant from the government?

If you’re a first home buyer, the answer is probably yes.

The amount and eligibility criteria for the First Home Owner Grant varies, but here is a summary of what each state currently offers;

  • NSW – a $10,000 grant available for new properties valued up to $600,000 or $750,000 when building a home.
  • Victoria – a $10,000 grant for buying or building a new home valued up to $750,000.
  • Queensland – a $15,000 grant to buy or build a new home valued up to $750,000.
  • ACT - a $7,000 grant. For 2023-24, the maximum concession amount is $34,504.
  • WA – a $10,000 grant for buying or building a new home valued up to $750,000 (south of the 26th parallel) or $1 million (north of the 26th parallel).
  • SA – a $15,000 grant for buying or building a new home valued up to $650,000 (where the contract was entered into on or after 15 June 2023) or $575,000 (where the contract was entered into on or before 14 June 2023).
  • Tasmania – up to $30,000 grant for buying or building a new home.
  • NT - a $10,000 grant for buying or building a new home of any value.

To see the eligibility criteria for your state or territory, visit the government website.

How much deposit do I need for a home loan?

What is a good deposit on a house? The simple answer is as much as you can possibly get together. The larger the deposit you have, the smaller the loan you’ll need, the easier the approval process will be and the better the interest rate and loan terms you’ll be able to negotiate.

The minimum home loan deposit normally required is 10%, but you should try and get at least 20% together if you can. That’s because if you borrow more than 80% of a property’s value, your lender may require you to take out Lenders’ Mortgage Insurance.

It’s also worth checking if you’re eligible for any grants or government schemes (like the First Home Owner Grant), as they can help to bolster your deposit amount.

Will making extra loan repayments help pay off the loan earlier?

Yes. Making additional repayments can reduce the overall repayment period. Tiimely Own home loans allow unlimited additional repayments on all variable home loans, and up to $20,000 of additional repayments per year on all fixed home loans.

Can you borrow more money with a bigger deposit?

In short, no. However, your maximum purchase price may increase with a higher deposit.

When we look at your borrowing power, we take into account your ability to comfortably meet repayment requirements, which is impacted by your income, expenses, other financial commitments and living/family situation (eg de facto, single, dependents or no). All of these factors can impact how much you can borrow. Using tools like borrowing calculators is an easy way to get an idea of how much you can borrow.

How much deposit do I need for my first home?

With a Tiimely Own home loan you can get a first home owner loan with a minimum 10% deposit. If you have less than a 20% deposit you’ll need to pay Lenders’ Mortgage Insurance (LMI). LMI protects the lender in case you can’t make your repayments, the cost can be added to your total loan amount (but keep in mind this means you’ll have less to spend on your home). You’ll also need additional funds to cover any government and third-party fees.

What does LVR mean?

Lenders use it to determine risk when assessing loan applications, so here’s a quick summary of what you need to know about LVR.

What is it?

LVR stands for Loan to Value Ratio. Simply put, it’s a comparison of how much you’re borrowing with how much the property you’re purchasing is worth.

How is it calculated?

LVR is calculated by dividing the loan amount by the purchase price or valuation of the property and multiplying it by 100.

For example, a $240,000 loan to buy a property valued at $300,000 would have an 80% LVR (240,000 divided by 300,000 multiplied by 100).

LVR is important to lenders because the lower the LVR is, the lower the risk is to the lender.

What types of loans does it apply to?

LVR is used by lenders to calculate risk on all sorts of different types of home loans including;

Standard home loan – LVR is calculated by subtracting your deposit from the purchase price and dividing the remainder by the property value.

Refinancing – the lender uses their own valuation of the property to calculate LVR because the price you paid for the property may no longer be relevant.

Off-the-plan – because the value may change by the time the home is built, the lender uses either the purchase price or valuation to calculate LVR, whichever is lower.

Favourable purchase (between family members) – the lender also chooses the lower amount between purchase price and valuation.

For units/apartments that are considered to be high density, then LMI may apply if the LVR is more than 70%. Speak with our team if you want to check.

Still not crystal clear on LVR? Contact us at Tiimely Home to assess your individual needs.

Can fixed rates fix your budget?

Budgeting can be hard. Trying to work out where your money is going and how much you will have to spare is stressful. Not to mention planning for unexpected costs that seem to pop up too often. So, having a fixed home loan repayment is something you know won’t change. And the fewer the surprises, the better.

Having a fixed period on your home loan gives you a set interest rate for a set length of time (usually 1-5 years). During this time the interest rate on your loan does not change. This gives you the security of knowing how much your repayments will be for that period. Which means you can create a more accurate long-term budget. Setting your repayments up as direct debits means you won’t think twice. It's important to note that if rates do change however, you may be required to pay a higher amount than others in the market.

You can start prepping by using a budget calculator to figure out how much you are spending and where you are spending it. ASIC’s MoneySmart has a handy online planner to help get you started.

Legal things about our rates
Our home loans are subject to credit criteria and eligibility requirements. Home loan interest rates are for new customers only and can change. Our comparison rates are based on a $150,000 loan amount over a 25 year term. They factor in fees associated with applying for the loan; ongoing fees and fees associated with leaving the loan. Our fixed loans roll to a variable principal and interest rate at the end of the fixed term. If the interest only period is not specified, the comparison rate is calculated on a one year period.

WARNING: The comparison rates are true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate.

Tiimely Turnaround
^Our turnaround times are up to 2x faster than the industry, based on a comparison of our average platform submit to approval time compared to industry submit to approval time, published here  (June 2023). Customer turnaround times are dependent on individual circumstances and may require an assessor to obtain more information.

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Tiimely is a registered trademark of Tiimely Pty Ltd.