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October 25, 2021

The Basics Of Your First Home Loan

Stark Finance is a mortgage provider based in Melbourne that has many benefits for first-time home buyers. When getting a home loan, many people look to some of the bigger banks in Australia. However, Stark Finance has access to over forty lenders and can often get you a favorable financing product. In fact, Stark Finance has a 95% success rate on mortgage loan applications. Let’s take a look at some of the basics of home lending if you are purchasing your first home.

What Type Of Interest Rate Do You Need?

There are two different types of interest rates on home loans. You can either get a variable rate loan or a fixed rate loan. Fixed rate loans are particularly attractive because they will get you a fixed interest rate for a particular amount of time, the standard period of time being about five years. Variable rates change over the life of the term and fluctuate based upon market conditions. While variable interest rate loans tend to have lower features, some do include a redraw option that can give you access to additional money if you need it in the future.

Some loans have something called a “honeymoon” option, which gives you a lower fixed rate for a particular amount of time (the standard being 1 to 2 years). After the period of time expires, you will have a higher standard variable rate.

What Are The Different Types of Home Loans and the Advantages of Each?

Fixed Rate Mortgage

As discussed above, a fix rate loan gives you one fixed rate for a period of time. This type of home loan is advantageous because your fixed payment makes it easier to budget. However, this type of loan is not as flexible and can include extra fees.

Variable Rate Mortgage

If interest rates on a variable rate loan fall, your monthly payments can decrease. This type of loan also lets you make more repayments without penalty. Some more basic types of variable rate loans don’t have very much flexibility, unfortunately.

Honeymoon and Introductory

These loans, by and far, can get you the best interest rates during the first few years of your loan. That being said, be sure to plan for higher interest rates when the honeymoon period expires.

Split Loans

This type of loan allows you to combine your loan into different types and can include a fixed rate, a variable rate, and a line of credit option. The only drawback to this loan is that the variable interest rate component can still result in a higher monthly loan payment.

Line of Credit/Equity

These are types of loans that are drawn against a registered mortgage or property. These loans can be taken out for renovations and other purposes. These loans may be better than refinancing and are generally extremely flexible. That being said, they are subject to variable interest rates and you can expect a higher payment if interest rates go up.

Low Documentation

These loans are designed for if you are self-employed or own a small business. They require only simple documentation, such as a certified letter from your accountant. One of the drawbacks is that you are hit with a higher interest rate.

Borrowing For Your New Home and Borrowing Capacity

This is one of the reasons you should really work with Stark Finance. There are several different ways that we can help you get enticing financing packages.

Understanding and Calculating Your Borrowing Capacity

When you have a larger uncommitted portion of your income, you are going to be subject to better borrowing conditions. We will analyze:

  • Your loan value ratio, term, and other loan features.
  • Your income amount and types.
  • Other financial obligations and credit card limits.
  • Your number of dependents.

Different lenders analyze borrowing capacity differently. If you apply for a loan and are not successful, we can help you understand why you were disapproved and counsel you on which debts and financial obligations you should pay off, decrease limits on other loans, and set a budget. This will help you get into the home you’d like in the long run.

How Stark Finance Can Help You Get the Best Deal

Stark Finance can help you get the best deal on a mortgage through a wide variety of different ways. For example, we can help negotiate the interest rate. Let’s say you are working on a variable rate loan for a $600,000 home. A reduction of even .1% will help you save up to $600 per year. Our network of 40 lenders can also get you great counteroffers.

When you work with a mortgage provider like Stark Finance, we will also help you have a solid understanding of your negotiation position. Stark Finance has a 95% approval rating on mortgage applications. We can help you analyze your full finances to understand the best type of mortgage product for your needs.

What Costs Should I Plan For When I Purchase My First Home?

When purchasing your first home, you should know all the costs associated with your mortgage. These include state taxes and fees. You will also pay some lender fees, such as origination and service fees. There are also legal fees that can be as high as $3,000 and inspection fees.

What Can I Expect When I Work With Stark Finance

With Stark Finance, you can rest assured that you will get the best product that matches your financial background. We have options for the self-employed through our low documentation loan options. Moreover, we have access to 40 different lenders to help you get a competitive loan option. Lastly, your experience with us will not end with your first home mortgage. If you decide to refinance later or do a home renovation, we can help you get rates that are competitive.