Beginner's Guide to Buying a House and Home Loans

Buying a house starts with knowing how much you can borrow and what the repayments will feel like. Once you have those two numbers, every other decision gets calmer.

If you live in Ourimbah and you are thinking about buying, you probably have a lot of questions and not much time to sort through them. That is normal. This guide covers the decisions that matter most, in the order you will face them.

How Much Can I Borrow for a Home Loan?

Your borrowing capacity depends on your income, your expenses, your debts and the lender you apply with. Different lenders assess the same person differently, so the loan amount you can get is not one fixed number.

Credit card limits count even when the card is unused, and that can reduce what a lender will offer. Lowering a limit or closing a card before you apply can sometimes change the result. You can get a rough idea using our borrowing capacity page.

Home Loan Pre-Approval: What It Does and Doesn't Do

Home loan pre-approval is a lender's conditional indication of how much it may lend you. It gives you a budget to shop with, but it is not a final approval.

The lender still has to assess the property you choose, and your finances need to stay the same until settlement. A new car loan or a job change in between can affect the outcome. Pre-approval also expires after a set period, which varies by lender, so ask about the timeframe before you start inspecting houses.

Variable Rate, Fixed Rate or Split Rate: Which Suits You?

A variable rate moves with the lender's decisions, a fixed rate stays the same for a set period, and a split loan does both. The right choice depends on how much certainty you need and how much flexibility you want.

Each one has a trade-off. A variable rate can rise, which lifts your repayments. A fixed rate gives certainty, but extra repayments are often capped and there may be break costs if you leave early. A split rate spreads the risk, but it means managing two loan balances. If you want to know when a fixed term ends and what happens next, see our fixed rate expiry page.

The rate on offer depends on your deposit size and your lender. Comparing several lenders is worth the effort, because rate discounts vary and a small difference adds up over many years.

Interest Only vs Principal and Interest: A Repayment Example

Principal and interest repayments pay down the loan from day one, while interest only repayments cover just the interest for a set period. Interest only is lower at first, but the repayments jump later and you do not pay down the loan balance during that period unless you make extra repayments.

As an example, consider a buyer borrowing $500,000 on an owner occupied home loan. We will use an illustrative rate of 6.75% p.a. for every figure here. This is not a current offer.

• Principal and interest over 30 years: about $3,243 a month.
• Interest only: about $2,813 a month, which is roughly $430 less.
• Interest only for 5 years, then principal and interest over the remaining 25 years: about $3,455 a month.

A buyer in this position might like the lower early repayment. But the numbers show that after five years they would pay about $212 a month more than if they had started on principal and interest, and they would still owe the full $500,000. A buyer might therefore prefer principal and interest, for a steady repayment they can plan around and a balance that falls from the first month.

You can test your own numbers with the mortgage repayment calculator. Your actual rate will depend on your lender and your deposit.

Offset Accounts and Other Home Loan Features Worth Asking About

An offset account is a transaction account linked to your loan. Its balance reduces the amount you pay interest on, while your money stays accessible.

The trade-off is cost. Loans with a linked offset can carry a higher rate or an annual package fee, depending on the lender. An offset tends to suit people who will keep a meaningful balance in it. If you will not, a basic loan may cost less overall. Other features worth asking about include redraw, extra repayment limits and whether the loan is portable if you move house.

Deposit Size, LVR and Lenders Mortgage Insurance

Your loan to value ratio (LVR) is your loan amount divided by the property's value. A smaller deposit means a higher LVR, and that can mean Lenders Mortgage Insurance (LMI).

LMI protects the lender, not you, and it is usually a one-off cost that can be added to the loan. Adding it means you pay interest on it. The cost depends on your LVR, your loan size and the lender, so ask for a quote before you commit to a deposit amount. If you are buying your first home, our first home buyers page covers the support that may be available to you.

Buying in Ourimbah: Practical Points for Local Buyers

A broker can compare loan products and explain the differences in plain English. We then handle the home loan application with you, chase the lender and keep you updated, so you are not left waiting for an answer. If you want to see how we work locally, visit our Ourimbah mortgage broker page, or explore the full range of home loans we can arrange.

Before you sign a contract, ask your broker to check how any home loan will fit your budget if rates rise. Then you are buying with a buffer, not just a hope.

Ready to take the next step? Call one of our team or book an appointment at a time that works for you. We will go through your numbers, answer your questions and help you move forward with confidence.

Frequently Asked Questions