Home Loan Fact Sheet:
Buying your first home may seem a way off into the distance yet, but when you do get the urge to “settle down”, you will more than likely do so with the help of a home loan.
Home Loans are a bit different to every type of credit we’ve discussed in a few ways. Home Loans are not really considered personal credit for buying whims, but more a financial tool for purchasing an investment.
Term and Principal: Obviously home loans are for a LOT of money, and take a LONG time to pay off (up to 30 years). The average price of a house, particularly in South East Queensland has risen sharply over the past 5 years. So you would expect to be borrowing anywhere between $100,000 to 300,000, depending on where it is located.
Interest: Like any other loan the bank lays down the ground rules – repayments, interest rate and term. At the moment home loan interest rates are much cheaper than the other credit options, sitting at around 7-10%.
Fees: Home loans involve some hefty fees up front, sometimes as much as $600-$700. That’s just to get everything underway. When you buy a home there are a lot of checks to be done on the value of the property and legal issues to deal with in transferring ownership. This is where much of the cost arises from.
Stamp Duty: You will also have to pay the government for the pleasure of taking out a home loan and this is called Stamp Duty. It will be a percentage of the borrowed amount. As if that’s not enough, stamp duty is also payable on the purchase of the house itself!!
Deposit: You will definitely need to save a deposit for this type of loan – normally at least 5% or 10% of the principal. (It doesn’t sound like a lot, but 10% of a $300,000 loan is $30,000 – not cheap!).
This is mainly because your financial provider wants cold hard proof that you can save before they hand over all that money – they need to know you are capable of meeting your repayments (which is a bit like forced saving) and having the self discipline a homeowner needs.
So you go off and buy a home sweet home and then settle in for a long period of debt. But home loan debt is seen as a much more positive thing than other kinds of debt for personal items.
That is because you are paying off an appreciating asset, or something that is most likely to grow in value, not decrease until it’s pretty much worthless.
To help people own their own home, banks, credit unions and building societies have come up with a wide range of loan types and interest options. These are aimed at fitting in with your lifestyle over a prolonged period. Getting a home loan is DEFINITELY a shopping around exercise, and borrowers normally probably canvass a few different loan types from at least a couple of different financial institutions.
If you’d like more information about these loan types, you can collect a copy of QTCU’s Home Loan Solutions Kit (PDF) from any branch, or visit the home loan centre on our QTCU website.
You should also have a browse around at the sites of other financial institutions to see what they have online. Many have calculators that will help you figure out how much deposit you’ll need and what your loan repayments would be etc.
If you want to Invest Through a Credit Union, you can’t go wrong with Riegelwood Credit Union.