Buying a home can be intimidating for anyone, especially for first-timers. Now, most of the difficulties that first time home buyers experience stem from the lack of knowledge about the process. This is especially evident when it comes to the many terms that first-timers aren’t familiar with. In fact, the lack of knowledge makes what could have been an easily manageable task into one that is stressful and difficult.
To help you out with this, we’ve prepared a short guide on the four terms that you have to know as a first time home buyer:
1. Stamp Duty
If you’ve never heard of the term stamp duty, then you may want to put any major purchases on hold. The stamp duty is a government-imposed tax that is attached to transactions concerning real estate, cars, and other assets. In the world of real estate, the purchaser is the one who always pays this tax, which is why you’ll want to consider this when determining your budget for your first home.
Another point you have to account for when it comes to stamp duty is that the amount you have to pay may vary depending on several factors. Here is a list of the most influential factors that affect stamp duty:
- Type of property (residence or investment)
- Nationality (Australian or foreigner)
- Home buying history (first time or not)
2. Offset Account
Another thing you have to familiarise yourself with is an offset account. This is a transaction account that can be linked to home loans or investment loans. The way this works is simple: the amount in your transaction account is offset daily depending on the remaining balance of your home loan, effectively reducing the interest payments on your loan.
What’s great about this is that you can contribute funds to the account at any time, and the balance is used to calculate how much interest you still have to pay on your loan. This is a great option to consider as it allows you to chip away at your mortgage on your own terms!
Now, we understand that you’re always on the lookout for the best home loans in Sydney. However, finding the right loan is only half of the process because you still have to get approved for it. When it comes to approval, there are two levels that you’ll want to be aware of––pre-approval and formal approval.
Pre-approval is when a lender informs you in writing regarding the amount they’re willing to loan you. Yet, keep in mind that this is still subject to lending terms and other conditions. From there, you will move on to formal approval once the lender formally approves your loan application and gives you access to the funds.
The loan-to-value (LVR) ratio refers to the amount of money your borrowing puts up against the value of the property you are purchasing.
Lenders use this metric to assess your application, as it is a good way to measure risk. The lower the LVR, the lower the risk. Loans that are less risky are more likely to be approved. In fact, the way LVR is calculated is by dividing the loan amount by the valuation of the property, and that number is then multiplied by 100.
While it can be rather daunting to purchase your first home, it’s important to understand that most of your worries stem from not understanding the entire process. We hope this article has helped put you at ease and shed some light on the matter. If you have any more questions about this, it would be best to direct them to your trusted mortgage experts!
If you’re looking for the best home loans in Sydney, Wealthy You has got your back. With the industry experience for a little over a decade now, client satisfaction is guaranteed as our dedicated team of experts can provide you with the right mortgage loan that’s best suited for your needs and financial situation. If you need more information about our services, reach out to us today!