Knowing the facts is enormously important when you intend to find the right home loan. Every year, many Australians seek to apply for home loans in Perth and in other areas across the country to buy a new home, to finance home improvement projects or to purchase property and to build a new home upon it.
What you need to know before taking out home loans in Perth
If you know people who have just recently obtained home loans in Western Australia (WA), they can tell you a thing or two: that stamp duty taxes have been brutalizing home buyers in Australia over the last few decades and why Perth is the best place to procure a new house in the Australian market.
Compared to the US tax rate of below 1% and in Canada of below 1.3%, the tax for a property worth $545,000 in Australia would compute an average of 3.7% but only 3.6% in WA. And if you can afford a home worth $3.82 million, you will be facing an average Australian tax rate of 5.3% compared to 4.9% in WA. This lesser tax rate is only the starting point when applying for home loans in WA. First home buyers who obtained home loans in WA and bought their home for less than $500,000 are also not liable to pay Stamp Duty Tax.
Tips on choosing the best home loan:
Determine your financial needs
Before you consider taking out a home loan, know your financial needs. This will allow you to determine whether to buy a new house, build a new house, or improve the existing condition and up-value your own home. Home loans, or any loan for that matter must accommodate individual circumstances. Taking out a home loan will affect your family and is a big move. So it would be wise to consider this carefully. Doing the accounting, being prudent and ensuring that you identify and mitigate the risks are some of the active measures one should take to avoid any financial calamity.
Know the different variations of home loans
Home loans are available in many different variations including introductory loans, variable and fixed rate loans. When choosing the right home loan, always take a good look around and compare interest rates, fees and features. Understanding the loan structure is very important so spend time asking questions if you don’t understand to make sure you find the right home loan which ultimately suits your circumstances.
Know how much deposit you can put down
Home loan providers may very likely require a deposit of the loan to cover loan insurance. Nowadays, some lenders offer a 100% loan without deposit, but such loans incur a high interest rates and increased charges in the long run. Unless you’re willing to suffer additional interests or fees, make use of your savings, and other means at your disposal to provide the deposit required, which will make your loan repayments easier over the long run.
Look for certain features that will work to your advantage
An offset account is a home loan feature that allows you to link your account to your home loan. If you have savings of $20,000 in the account and your home loan is $100,000, you will only pay the interest for the $80,000. This feature reduces your payments and is always a handy option. The Redraw Facility is another feature that allows you to pay your loan with extra amounts that you can take out anytime you need for other purposes at no extra cost. This extra money serves to offset your loan to reduce the interest.
Ask for a Key Fact Sheet and prepare a checklist
A Key Fact Sheet from the lender gives you the information you need in a simple format so you can shop around and compare loans. A Key Fact Sheet highlights crucial information such as the total interest you will be paying, other fees and charges, payment repayment structure and the total amount to be paid back over the life of the loan. Once you have gathered the key fact sheets of each lender, prepare your checklist to summarise your options and see which one is most effective. This is the best way to find the right home loan for your needs.
Know your loan consultant or mortgage broker
In the face of many different factors that affect home loans, it is extremely recommended to only get a qualified, competent and trusted loan consultant to help you sort out often confusing loan terms and conditions. Ideally, a loan consultant or mortgage broker should be an MFAA member so you can be assured of professional integrity, transparency and trust. While most mortgage brokers are paid by the loan providers, it always pays off to pop the question so you are aware also of where their interests may lie.
For more on home loans, Westminster International is a good source for information and consultancy on anything home loans related and have the expertise to advise you effectively.
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