Stepping into the property market as a first home buyer can feel overwhelming, especially when deciding between different home loan options. If you're living on the Central Coast or in Narara, understanding variable rate loans and how extra repayments can work in your favour is crucial for making informed decisions about your first home loan.
Understanding Variable Interest Rate Loans
A variable interest rate loan means your interest rate can change over time based on market conditions and your lender's decisions. Unlike a fixed interest rate that stays the same for a set period, variable rates fluctuate with the Reserve Bank of Australia's cash rate movements.
For first home buyers, variable rate loans offer several advantages:
• Flexibility with repayments - You can typically make extra repayments without penalties
• Access to features like offset accounts and redraw facilities
• Potential for rate decreases when market conditions improve
• No restrictions when rates drop, unlike fixed loans that lock you in
Making Extra Repayments Work for You
Extra repayments are additional amounts you pay above your minimum monthly repayment. Even small additional payments can significantly reduce your loan term and total interest paid over the life of your first home loan.
For example, if you have a $500,000 home loan with a 6% variable interest rate over 30 years, paying an extra $100 per month could save you approximately $65,000 in interest and reduce your loan term by about 4 years.
Ready to get started?
Book a chat with a Finance and Mortgage Broker at Coco Finance Broking today.
Offset Accounts: Your Secret Weapon
Many variable rate loans come with offset account options. This feature links a transaction account to your home loan, and the balance in your offset account reduces the amount of interest you pay on your mortgage.
If you have $20,000 in your offset account and a $400,000 home loan, you'll only pay interest on $380,000. This can be particularly valuable for first home buyers who receive first home owner grants (FHOG) or have savings they want to keep accessible.
First Home Buyer Support Available
As a first home buyer on the Central Coast, you have access to various government schemes and concessions:
- First Home Loan Deposit Scheme - Allows eligible buyers to purchase with as little as a 5% deposit
- Regional First Home Buyer Guarantee - May apply to certain areas around the Central Coast
- First home buyer stamp duty concessions - Significant savings on stamp duty for eligible purchases
- First Home Super Saver Scheme - Use your super to help fund your deposit
Low Deposit Options and LMI
Many first home buyers worry about saving a 20% deposit. Variable rate loans often accommodate low deposit options, including 5% deposit and 10% deposit arrangements. When you borrow more than 80% of the property value, you'll typically need Lenders Mortgage Insurance (LMI), but this shouldn't prevent you from entering the market sooner.
Some lenders also accept a gift deposit from family members, which can help boost your deposit amount and improve your first home buyer eligibility.
The Application Process
When you're ready to apply for a home loan, having your first home buyer checklist organised will streamline your first home loan application:
• Recent payslips and tax returns
• Bank statements showing your savings pattern
• Details of any debts or ongoing expenses
• Identification documents
• Information about the property you're purchasing
Getting pre-approval before you start house hunting gives you confidence in your first home buyer budget and shows sellers you're a serious buyer.
Redraw Facilities: Accessing Your Extra Payments
Most variable rate loans include redraw facilities, allowing you to access extra repayments you've made if you need funds for renovations, emergencies, or other purposes. This feature provides flexibility that fixed interest rate loans typically don't offer.
Interest Rate Discounts and Features
Many lenders offer interest rate discounts for first home buyers, especially when combined with other banking products. Variable rate loans often come with package deals that can include:
• Reduced interest rates
• Fee waivers
• Complimentary credit cards
• Insurance discounts
Making Your Decision
Choosing the right home loan options depends on your personal circumstances, risk tolerance, and financial goals. Variable rate loans suit first home buyers who:
• Want flexibility to make extra repayments
• Value access to features like offset accounts
• Can handle some uncertainty with rate movements
• Plan to pay off their loan faster than the standard 30-year term
If you're buying your first home on the Central Coast or in Narara, working with a local mortgage broker who understands the area and available first home buyer programs can make a significant difference to your outcome.
Variable rate loans combined with a strategy of making extra repayments can accelerate your path to owning your home outright. The key is understanding how these features work together and ensuring they align with your financial situation and goals.
Ready to explore your home loan options and start your journey to homeownership? Call one of our team or book an appointment at a time that works for you. Our experienced team at Coco Finance Broking is here to help Central Coast and Narara residents find the right loan solution for their needs.
