Stamp duty is government tax based on the market value of the land or property that you are purchasing. The rate of tax charged varies between states and territories, as well as the type and cost of the property.

Depending on whether you are a First Home Buyer or not, there are concessional rates that reduce or even eliminate stamp duty.

When you build, you only pay stamp duty on the land which can save you thousands.

The lender (bank) and borrower (you) will agree on a term in which the loan is to be paid back ‒ typically, this will be a period of 25 to 30 years. The lender and borrower will also agree on a repayment schedule, which will generally be fortnightly or monthly.

In addition to the total loan amount, you will be required to pay interest. The type of interest payable will be determined by the loan agreement. There are several types of interest rates, including fixed and variable. We explain this in further detail below.

A variable-rate home loan is a loan in which the interest rate is not set. Instead, it will vary over the period of the loan, rising and falling depending on the cash rate and is set by the lender. A variable-rate loan provides more flexibility and allows you to make additional repayments towards your mortgage, which in turn will help you pay off your loan sooner.

A fixed-rate loan is one in which the interest rate is set for a certain period of time, generally between one to five years. At the end of your fixed-term, you may choose to re-fix your loan at the new offered rates or roll onto a variable-rate loan. The primary benefit of taking out a fixed-rate home loan is the greater sense of financial certainty it provides. For example, if your lender increased their interest rates during that time, your fixed-rate and repayments will not be affected. Therefore, it helps those who are budget conscious or worried about increasing interest rates.

Depending on your personal circumstances, you may wish to secure a split loan of both variable and fixed. Albeit, it can be overwhelming to choose, which is why our Mortgage Broker’s will do the heavy lifting to help solve this decision for you.

Fixed-rate, variable-rate, and split loans all have their individual pros and cons, and what works best for you will depend on your individual financial circumstances.

The terms ‘home loan’ and ‘mortgage’ often is interchangeable, so is there a difference?

Yes, there is a distinction between the two, and it is important to clarify the difference, even if it may only seem semantic.

The terms ‘home loan’ and ‘mortgage’ are often used interchangeably. In technical terms, there is a difference between the two. ‘Home loan’ refers to the funds borrowed to purchase the land or property, while ‘mortgage’ refers specifically to the agreement in which is used as security for a loan.

Typically, you will need a minimum of 20% deposit to buy a home. Let’s say the property purchase price is $400k, you will need $80k for your deposit.

But what if I don’t have 20%?

No problem! We have options available for as little as 2% deposit.

Pay Lenders Mortgage Insurance (LMI). This can be included either in your upfront costs or loan repayments, so it is spread out over the life of the loan (though note any fees added to your loan balance will attract interest charges).

Lenders Mortgage Insurance (LMI) is a one-off cost from the bank that is added to your home loan. This protects the bank against any loss they may incur if you are unable to repay your loan. Depending on how much you borrow and the size of your deposit is how it is calculated. The more you contribute to the purchase price of your property, the lower it will be.

Our in-house finance team Westgate Finance can guide you toward the best loan options available.

The amount you can borrow depends on a range of things. We will consider personal and financial details, which may include:

• Income
• Expenses
• Liabilities, including other debts and
• Existing assets, such as investment properties.

Find out how much you can borrow with our online loan calculator: https://www.newgenerationhomes.com.au/new-home-finance/how-much-can-i-borrow/

In recent years, banks have begun casting a wider net on expenses with the aim to increase an individual’s chance of approval.

Below is typical process used by banks and lenders to calculate your living expenses:

• Apply the Household Expenditure Method (HEM) The HEM is the benchmark that banks use for living expense allowances based on the size of your household, whether you’re a single applicant, a couple or you have dependents. Banks will also take into account whether you’re living in a metro area versus a non metro area for each state.
• Ask you to self-assess your living expenses on your home loan application form. This is for expenses that fall outside the HEM including; rent, groceries, clothing/personal care, education, insurances, investment properties, transport, telecoms/streaming, childrecare, medical, entertainment, own property maintenance, and any other regular expenses.
• Review any bank account (cheque or savings accounts) or credit card statements to confirm your self assessment.
• Either accept or adjust your stated expenses to match your bank account history.
• Take the higher of the above living expense assessment methods to calculate your living expenses.

Your credit score is an automatic, computer-generated assessment of the risk of your loan application. Each bank or lender has a different way of calculating credit scores but your credit history with Equifax (including your Equifax Score) is the single most important factor that lenders will take into account when deciding whether or not to grant you a home loan. The number, or ‘score, you have on your Equifax Score compares you as a borrower to the rest of the Australian population. Your Equifax Score is ultimately a score of all the details of your credit file including;

• basic personal information including employment
• type of credit provider you applied with
• the nature of the credit or loan, credit enquiries
• shopping pattern
• loan defaults
• court writs
• court judgments (with creditors)
• Bankruptcy history
• use of Buy now pay later services.

Banks and lenders offer three common types of loans for traditional home loans to buy an established property including a standard variable loan, fixed rate loan, or split rate loan. However, if you are building your home, an entirely different loan is required. A construction loan is a loan that allows you to progressively draw money throughout the construction process to pay the builder, while only paying interest on the amount you use.

As mentioned, a construction loan allows you to draw money down from the loan to make progress payments as each stage of construction is completed. The first progress payment is due once your slab is poured. At New Generation you have a direct line of communication to your Construction Supervisor who will update you on these stages as well as keep your Customer Portal up-to-date so you know when these payments are due. Your team will help take care of these progress payments with you. The way payments are divided are below, please note this is an example only.

Slab poured = 10% of the contract value

Walls up = 30% of the contract value

Roof on = 20% of the contract value

Lock up = 20% of the contract value

Practical completion = Final payment is made and 100% of the contract value is now fulfilled and full repayments begin.

The First Home Owners Grant (FHOG) is a one-off $10,000 payment from the WA Government to help you buy or build your first home. You can buy an existing home, an off-the-plan home, or house and land package. (Just a note, if you’re buying an off-the-plan home or building a new home in Perth, the maximum you can spend if you want to receive the FHOG is $750,000.) There’s some FHOG criteria you’ll need to meet, but it’s very straightforward. New Generation Homes is an FHOG-approved builder. This means we can help you apply and assist with the paperwork as well as decode all the fine print.

Many mainstream lenders may want to see a minimum of 5% in genuine savings as part of your home loan deposit. This shows you have good money discipline and will aid lenders in their assessment of your home loan application. Examples of genuine savings include:

• A bank account showing money you have saved up over time that you have made regular contributions towards – generally for over 6 months.
• Stocks and shares can often be considered genuine savings if they have been held for at least six months.

Recently, some lenders are accepting the act of paying rent as proof of genuine savings. If you have been renting for more than 3 months (generally over 12 months) and have been diligently paying rent on time with no issues, you might be able to tick the ‘genuine savings’ box.