So just what is your budget for your first home? Well, your borrowing capacity is determined by a mix of criteria that assesses your ability to meet your home loan repayments. Basically, banks want to know you can pay their money back (this is due to responsible lending practices – fair ).

Banks and lenders will look at your:

• Income
• Assets
• Debts and living expenses
• Credit score
• Property value (of the home you want to buy)
• Type of home loan
• deposit amount

The quick answer is most lenders require a deposit of at least 5 – 20% of the total home loan amount. Yep, a decent chunk of change!

This deposit has to be ‘genuine savings’ which means there’s evidence of money accumulating in your savings account, over a minimum of 3 months. OR, if you have been paying rent for over 12 months, some lenders will use this as proof of your ability to service a loan and consider this your ‘genuine savings’.

At Easystart, we understand not all first home buyers will have a large amount of savings available for a deposit. So we’ve created an awesome No Savings Home Loan that’ll help get you into your first home, sooner.

There’s another option for those with smaller deposits and that’s wrapped up in what’s called a Keystart loan. This is an initiative of the WA government and you only need a 2% deposit.

Standard Variable Loan

This is where the interest rate that’s applied to your home loan can change whenever your lender changes the rate. This means your minimum repayments will decrease when interest rates go down, or will increase when rates go up.

Fixed Rate Loan

As the name suggests, these loans offer a fixed rate of interest regardless of interest rates changes in the market. These loans are usually offered for the first 1-5 years of the loan and then the home loan rate will switch. Make a note of what the rate is after the fixed rate period.

Split Rate Loan

The split rate loan is a goldilocks scenario where part of the loan is variable, and the other is fixed

Lenders mortgage insurance (LMI) is insurance that covers only the lender for the total of your outstanding loan balance if you can’t meet your mortgage repayments and default on your home loan.

• LMI is added to your total home loan amount as a one-off lump sum
• It acts as insurance that covers your lender (not you) if you default on your home loan.
• It is completely avoidable by…
  • Saving for a bigger deposit (more than 20% of your total home loan.)
  • Taking advantage of specific government schemes e.g. Keystart home loans.
• It doesn’t go away if you refinance later.