Smart ways to approach variable rate loan fees and costs

Understanding Variable Rate Loans for First Home Buyers

Buying your first home is an exciting milestone, but understanding the various fees and costs associated with variable rate loans can feel overwhelming. As first time home buyers in Tweed Heads, you'll want to know exactly what you're signing up for when applying for a home loan.

Variable interest rate loans offer flexibility that many first home buyers find appealing. Unlike fixed interest rate loans, your repayments can change when the Reserve Bank adjusts the cash rate or when your lender changes their rates. This means you could benefit from rate drops, but you'll also need to budget for potential increases.

Breaking Down the Key Costs

When you apply for a home loan, several costs will impact your financial situation. Here are the main expenses to consider:

Application and Setup Fees
Most lenders charge application fees ranging from $300 to $800. Some packages may waive these fees, particularly for first home buyers. Settlement fees typically cost between $150 to $400.

Lenders Mortgage Insurance (LMI)
If your loan to value ratio (LVR) exceeds 80%, you'll likely need to pay LMI. This protects the lender if you default on your loan. The cost varies based on your loan amount and deposit size, potentially ranging from $2,000 to $15,000 or more.

Ongoing Account Fees
Variable rate loans often come with monthly or annual account keeping fees, typically $10 to $15 per month. Some lenders offer packages that include an offset account with reduced fees.

Government Support for First Time Home Buyers

Fortunately, various first time home buyer schemes can help reduce your costs:

Home Guarantee Scheme
This government initiative allows eligible first home buyers to purchase with as little as a 5% deposit without paying LMI. The government guarantees up to 15% of the loan amount.

First Home Owner Grants (FHOG)
Depending on your circumstances and the property you're buying, you may be eligible for grants that can help with upfront costs.

Stamp Duty Concessions
Many states offer stamp duty reductions or exemptions for first home buyers, which can save thousands of dollars.

Additional Costs to Consider

Beyond the loan itself, buying a home involves other expenses:

1. Building and pest inspections ($400-$800)
2. Conveyancing fees ($800-$1,500)
3. Property valuation ($300-$600)
4. Mortgage registration fees (varies by state)
5. Title search fees ($100-$300)

Maximising Your Borrowing Capacity

To improve your borrowing capacity and potentially access better interest rate discounts, consider these factors:

• Maintain clean bank statements for at least three months
• Reduce existing debts and credit card limits
• Save a larger deposit to improve your LVR
• Consider having an offset account to reduce interest payments
• Get pre-approved to understand your budget before house hunting

Working with a Mortgage Broker

As a local mortgage broker in Tweed Heads, Living Home Loans can access home loan options from banks and lenders across Australia. This means we can compare packages and find options that suit your specific needs.

Our first home buyers service includes helping you understand first time home buyer programs available in your area. We'll also assist with the application process, making it more streamlined for busy professionals and families.

The Benefits of Professional Guidance

Navigating the property market as a first-time buyer involves many moving parts. Having access to banks and lenders nationwide through a mortgage broker means you're not limited to one institution's offerings. We can help you:

• Compare variable interest rate options across multiple lenders
• Understand which first investment property loans might suit future plans
• Calculate your actual borrowing capacity based on your income and expenses
• Identify the most suitable loan structure for your circumstances

Making an Informed Decision

When choosing between different loan options, consider not just the interest rate but the total cost of the loan over time. Some lenders offer attractive headline rates but charge higher fees. Others might provide valuable features like offset accounts or the ability to make extra repayments without penalties.

Remember that your first Home Loan doesn't have to be your last. As your financial situation improves and the property market changes, you might consider refinancing to access more suitable rates and features.

Variable rate loans offer flexibility that can work in your favour, especially if rates decline. However, it's important to budget for potential rate increases and ensure your loan structure supports your long-term financial goals.

Ready to explore your home loan options? Call one of our team or book an appointment at a time that works for you. We're here to help you understand the costs involved and find a variable rate loan that fits your budget and goals.