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) and establish an offset facility. 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 and minimum fees. You can also explore features that will suit your situation such as a redraw facility. You should also get professional financial advice to better understand your options.
Note: If you have a Loan to Valuation Ratio (LVR) of >80%, an offset facility will automatically be part of your Tiimely Own home loan.