Understanding Variable Rate Loans for First Home Buyers
For first home buyers in Preston, understanding your home loan options is crucial when entering the property market. Variable interest rate loans offer flexibility that can work in your favour as you begin your homeownership journey.
A variable interest rate moves up and down based on market conditions and lender decisions. Unlike fixed interest rates that remain constant for a set period, variable rates can change at any time. This means your repayments may fluctuate, but you could also benefit when rates decrease.
Key Benefits of Variable Rate Loans
Variable rate loans typically offer several advantages for first time home buyers:
• Flexibility in repayments - Make extra repayments without penalties
• Access to features - Redraw facilities and offset accounts are commonly available
• Interest rate discounts - Often come with package deals that include fee waivers
• No exit fees - Switch to another loan product more readily
When applying for a home loan, your borrowing capacity will be assessed based on your financial situation, including income, expenses, and existing debts. Lenders will also consider the loan to value ratio (LVR) when determining your loan amount.
How Offset Accounts Work
An offset account is a transaction account linked to your home loan that can significantly reduce the interest you pay. The balance in your offset account is subtracted from your outstanding loan amount before interest is calculated.
For example, if you have a $500,000 loan and $50,000 in your offset account, you'll only pay interest on $450,000. This can save thousands of dollars over the life of your loan whilst maintaining access to your funds.
Maximising Your Offset Account Benefits
To get the most from your offset account:
- Direct your salary into the offset account
- Keep savings in the account rather than separate savings accounts
- Use credit cards wisely - Pay everyday expenses on credit cards and pay them off monthly from your offset account
- Maintain higher balances - The more money in the account, the greater the interest savings
First Home Buyer Support Programs
As a first home buyer in Preston, you may be eligible for various government schemes and incentives:
• First home owner grants (FHOG) - Financial assistance for eligible first home buyers
• Home Guarantee Scheme - Allows you to buy with a smaller deposit
• Stamp duty concessions - Reduced or waived stamp duty for eligible buyers
• First time home buyer programs - Various state-based incentives and packages
These first time home buyer schemes can help reduce upfront costs and make homeownership more achievable. Understanding your eligibility for these benefits is essential when planning your home purchase.
The Application Process
The streamlined application process for variable rate loans typically involves:
- Pre-approval assessment - Get pre-approved to understand your borrowing capacity
- Documentation gathering - Provide bank statements, payslips, and other financial documents
- Property selection - Find a suitable property within your budget
- Final approval - Complete the loan application with property details
- Settlement - Finalise the purchase and receive your keys
Considerations for Preston Home Buyers
The property market in Preston offers diverse housing options for first home buyers. When buying your first home, consider factors such as:
• Location and amenities - Proximity to transport, schools, and shopping centres
• Property type and condition - Apartments, townhouses, or houses within your budget
• Future growth potential - Areas with development and infrastructure plans
• Total cost of ownership - Including rates, maintenance, and potential renovations
Working with Professional Support
As mortgage brokers, Blue Lion Lending provides access to home loan options from banks and lenders across Australia. This access to banks and lenders nationwide means you can compare different packages and find loan products that suit your specific needs.
Whether you're interested in your first home loan or considering future investment loan options, professional guidance can help you understand the application process and identify suitable lenders. Some borrowers may require lenders mortgage insurance (LMI) depending on their deposit amount and LVR.
Variable rate loans with offset accounts can provide the flexibility and potential savings that make homeownership more affordable for first home buyers in Preston. Understanding how these products work and accessing the right support can help you make informed decisions about buying a home.
Call one of our team or book an appointment at a time that works for you to discuss your home loan options and start your journey towards homeownership.