If you're a first home buyer in Mayfield, you've probably spent countless hours researching home loan options and trying to figure out which type of loan suits your situation. One of the biggest decisions you'll face is choosing between a fixed interest rate and a variable interest rate. While both have their merits, today we're focusing on variable rate loans and how making extra repayments can work in your favour.
Understanding Variable Interest Rates
A variable interest rate loan is exactly what it sounds like - the interest rate can move up or down throughout the life of your loan. This means your regular repayments can change based on market conditions and decisions made by the Reserve Bank of Australia.
For many first home buyers, variable rates offer flexibility that fixed rates simply can't match. You can usually make extra repayments without penalty, access features like an offset account or redraw facility, and potentially benefit from interest rate discounts when rates fall.
Why Extra Repayments Matter
When you're buying your first home, every dollar counts. Making extra repayments on your home loan - even small amounts - can save you thousands of dollars in interest over the life of your loan and help you own your home sooner.
Let's say you borrow $500,000 on a 30-year loan. By adding just $200 extra to your monthly repayment, you could potentially:
- Pay off your loan years earlier
- Save tens of thousands in interest charges
- Build equity in your property faster
- Create a financial buffer for unexpected expenses
Getting Started with Your First Home Loan Application
Before you can start making extra repayments, you need to secure your first home loan. The first home loan application process might seem overwhelming, but understanding what's involved can help you feel more confident.
Your first home buyer checklist should include:
- Checking your first home buyer eligibility
- Understanding your first home buyer budget
- Researching first home buyer grants and first home owner grants (FHOG)
- Looking into first home buyer stamp duty concessions
- Exploring the First Home Loan Deposit Scheme or Regional First Home Buyer Guarantee
- Getting pre-approval for your loan
Ready to get started?
Book a chat with a Finance & Mortgage Broker at Get Approved today.
Low Deposit Options for First Home Buyers
One of the biggest hurdles for first home buyers is saving enough for a deposit. The good news is that you don't necessarily need a 20% deposit to apply for a home loan.
Several low deposit options are available:
- 5% deposit: Through the First Home Loan Deposit Scheme, eligible buyers can purchase with just a 5% deposit without paying Lenders Mortgage Insurance (LMI)
- 10% deposit: Many lenders offer loans with a 10% deposit, though you'll typically need to pay LMI
- Gift deposit: Some lenders accept a portion of your deposit as a gift from family members
- First Home Super Saver Scheme: This allows you to save for your deposit within your superannuation fund
Variable Loan Features That Support Extra Repayments
When comparing home loan options, look for variable rate loans that include:
Redraw Facilities
A redraw facility lets you access the extra money you've paid into your home loan if you need it. This gives you flexibility while still allowing you to reduce your loan balance and interest charges.
Offset Account
An offset account is a transaction account linked to your home loan. The balance in this account offsets your loan balance, reducing the interest you pay. If you have $20,000 in your offset account and a $400,000 loan, you'll only pay interest on $380,000.
No Extra Repayment Restrictions
Make sure your variable rate loan allows unlimited extra repayments without penalties. Some loans have restrictions, so check the fine print during your home loan application process.
Creating Your Extra Repayment Strategy
Once you've secured your first home loan and moved into your Mayfield property, it's time to think about your repayment strategy. Here are some approaches that work for many first home buyers:
- Round up your repayments: If your monthly repayment is $2,247, round it up to $2,500
- Put windfalls towards your loan: Tax returns, bonuses, and gifts can make a real difference
- Set up automatic transfers: Schedule extra repayments to come out the day after payday
- Use your offset account wisely: Keep your everyday funds in your offset account rather than a regular savings account
Understanding Interest Rate Discounts
Many lenders offer interest rate discounts on variable loans, particularly for borrowers with larger deposits or those who bundle multiple products. When you apply for a home loan, ask about:
- Discounts for borrowing less than 80% of the property value
- Professional package discounts
- Loyalty discounts for existing customers
- Discounts for making repayments from the lender's transaction account
These discounts can reduce your interest rate by 0.10% to 0.70%, which adds up to significant savings over time.
Making the Most of Your Mayfield Property
As a first home buyer in Mayfield, you're investing in a suburb with solid growth potential. By choosing a variable rate loan with the flexibility to make extra repayments, you're setting yourself up to build wealth through property ownership while maintaining financial flexibility.
Remember, the combination of a variable interest rate and regular extra repayments gives you the best of both worlds - you can take advantage of rate decreases while actively reducing your loan balance.
Working with a Mortgage Broker
Whether you're just starting to explore buying your first home or you're ready to make your home loan application, working with an experienced mortgage broker in Mayfield can help you understand all your options.
A broker can help you:
- Compare variable rate loans from multiple lenders
- Find the loan features that suit your situation
- Understand first home buyer grants and concessions you're eligible for
- Structure your loan to maximise the benefit of extra repayments
- Navigate the pre-approval process
Don't let the process of buying your first home overwhelm you. With the right loan structure and a plan to make extra repayments, you'll be building equity and working towards owning your home outright sooner than you might think.
Ready to explore your options for a variable rate home loan? Call one of our team or book an appointment at a time that works for you. We're here to help first home buyers in Mayfield achieve their property ownership goals.
