First Things First
We at PEB Finance strongly recommend that you complete a budget exercise before considering any finance. This will help you in determining how much it really costs to live. While lenders have their own formulas it is important that you are comfortable in knowing that you can afford a home loan.
How is your credit?
One of the first things a lender will do at time of application for a home loan is obtain a copy of your credit file. Your credit file will show inquiries that you have made e.g. a phone account or credit card account. It may also show (hopefully not) any defaults that may have occurred.
We recommend you obtain a copy of your credit file by visiting www.mycreditfile.com.au. There are two ways you can order – FREE which takes about 10 days or if you want a copy within 24 hours you can complete online and pay a nominal fee @ $50.00. Your file copy will then be emailed back to you.
Income / Servicing
A lender will obviously want to know that you can afford your new home loan. For example you may be wishing to purchase a property for say $400 000, have $250 000 saved (silly example we know) but do not have a job. Guess what? The fact that you still need to borrow $150 000 and have no income will result in a loan being declined.
Credit cards, existing loans are all taken into account when determining our borrowing capacity. For example you may have a credit card with a $10,000 limit, but usually only spend $2000 a month on that card. You’re a good payer and pay your card off in full, each month. Well the truth is most lenders will take the limit of that card and not the amount owing when determining what you may be able to borrow. As a rule of thumb, they take 3% of the limit or $300 as a monthly expense, in this example. This means that your borrowing capacity is reduced by about $ 40,000.
TIP: Keep credit card limits to the lowest amount you require.
Savings / Equity
While the First Home Owners Grant will cover most of your fees, most Lenders will require you to have some deposit. Again a silly example but let’s say you have no savings at all and earn $300 000 a year. The good news you can repay most loans on that type of income, the bad news is if a property cannot settle, because you don’t have any savings or equity to put in, then a lender will decline your loan.
Finally, some lenders will allow you to finance with only a minimal deposit and the grant may cover this. The key here is to speak to us to see where you fit best.
When is the grant paid?
First home owners buying or building a new home may apply for a grant of up to $10,000 (Conditions apply, view fact sheet). Contracts signed between 1 January 2017 and 30 June 2017 may be eligible for an additional boost payment of $5,000 (conditions apply)
The other thing that you need to consider is what sort of loan features do you require? Do you require internet banking? Redraw? An offset account? We can help you with all of these and determine by working together, what product suits you better.
For more information or to help get you started, call 1300 187 894 and speak with a loan specialist.
*This article is for general information purposes only. It is not intended as financial or investment advice and should not be construed or relied on as such. Before making any commitment of a financial nature you should seek advice from a qualified and registered financial or investment adviser.
PEB Property Group is a complete financial planning advisory service for Perth families. Offices are located in Inglewood and Willetton, Perth, Western Australia and offer - Financial Planning · Finance Broking · Property Management · Real Estate Sales · Property Investment · Development.
PEB Finance is a trading name of PEB Brokers Pty Ltd ACN 604 784 401 | Australian Credit Licence 389510 | Credit Representative Number 476313.
PEB Real Estate is a trading name of PEB Real Estate Pty Ltd (Licensee) ABN 33 604 199 617 | Triennial Number RA70508.
PEB Financial Planning is a trading name of PEB Group WA Pty Ltd ACN 142 958 254. Rebecca Howarth and Howarth (WA) Pty Ltd trade as PEB Financial Planning. Rebecca Howarth (ARN 244928) and Howarth (WA) Pty Ltd (ARN 433328) are Authorised Representatives of NEO Financial Solutions Pty Ltd. AFSL 385845 | ABN 64 141 607 098.