Home Finance

Your Home Financing FAQs

• What is the First Home Owner Grant (FHOG) in Australia and who is eligible?

  The FHOG is a one-off grant for first-time home buyers to help with the cost of buying a home. Eligibility criteria include being a first-time buyer and meeting residency requirements. The grant amount and rules vary across different states and territories.

• What are the benefits of refinancing my mortgage?

  Refinancing can lead to better loan terms, such as lower interest rates, especially after successfully repaying your loan for a year or two, which can improve your credit score. With improved credit, Rapid Finance can assist in negotiating home loan refinancing with lenders on your behalf to secure more favourable terms, potentially reducing your monthly repayments or the total cost of the loan.

• How can I improve my chances of getting a better mortgage rate?

  Boosting your credit score, saving a larger deposit, reducing existing debts, and having a stable income could improve your chances. Rapid Finance could also help with strategies to enhance your loan application and advocate on your behalf with lenders to get you a deal that works for you and your financial situation.

• What are the pros and cons of a 15-year vs. a 30-year mortgage?

  As an example, when choosing between a 15-year and a 30-year mortgage for a $1,000,000 home loan at a 7% interest rate, it's important to consider the differences in monthly repayments and the total amount to be repaid over the life of the loan.

  • 15-Year Mortgage:

    • Monthly Repayment: You would pay approximately $8,988 per month.
    • Total Amount Repaid: The total repaid over 15 years would be approximately $1,617,890.
    • Pros: This option results in less interest paid over the life of the loan and quicker equity build-up in your property.
    • Cons: The main disadvantage is the higher monthly repayments, which could significantly impact your monthly budget.

  • 30-Year Mortgage:

    • Monthly Repayment: The monthly repayment would be around $6,653.
    • Total Amount Repaid: Over 30 years, the total repayment amount would be approximately $2,395,089.
    • Pros: The lower monthly repayments make this option more manageable, especially if you have other financial commitments or prefer more monthly cash flow.
    • Cons: The downside is the significantly higher total interest cost over the life of the loan and a slower rate of building equity in your home.

  In summary, a 15-year mortgage might be suitable if you can manage higher monthly payments and wish to save on interest in the long term. In contrast, a 30-year mortgage can ease your monthly financial burden but results in higher total interest payments. Your choice will depend on your financial situation and long-term property goals.

• How do redraw facilities and offset accounts work in Australian home loans?

  • Redraw Facility: Allows you to withdraw extra repayments you've made on your loan, providing flexibility and access to funds.
  • Offset Account: A savings account linked to your mortgage. The money in the offset account is deducted from your mortgage balance before interest is calculated, reducing the interest payable. 

  Both options offer advantages in managing your mortgage effectively, with redraw facilities providing access to extra funds, and offset accounts saving on interest costs.

• What are the differences between variable, fixed, and split home loans in Australia?

  Variable loans have interest rates that can change, fixed loans have set rates for a certain period, and split loans combine features of both. Each type has its advantages depending on your financial situation and goals.

• How do interest rates affect my mortgage payments?

  Higher interest rates mean higher monthly repayments, while lower rates can reduce your repayments. Fixed-rate loans offer certainty over repayments, while variable rates coudl go up or down.

• How does the Reserve Bank of Australia's interest rate affect home loans?

  The RBA's interest rate, also known as the cash rate, is a benchmark for lenders in setting their interest rates. A decrease in the RBA rate can lead to lower interest rates on home loans, making borrowing cheaper. Conversely, an increase in the RBA rate can result in higher loan interest rates, increasing the cost of borrowing. For instance, if the RBA rate drops, a homeowner with a variable-rate mortgage might see their monthly repayments decrease.

• Are there any government schemes available to help first home buyers in Australia?

  Yes, there are schemes like the First Home Loan Deposit Scheme, which allows first home buyers to purchase a home with a smaller deposit. Rapid Finance can provide guidance on these schemes and help determine your eligibility.

• What is a mortgage?

  A mortgage is a loan taken out to purchase property or land. The property is used as security against the debt until it's fully repaid. Mortgages are typically paid back over a long period, usually 20–30 years, and come in various types, such as fixed-rate or variable-rate. For example, a good credit score, typically above 800, can lead to better interest rates and terms. However, even with lower scores, such as around 500, it's possible to secure a mortgage, especially through brokers like Rapid Finance that specialise in helping those with less-than-perfect credit.

• What is Lenders Mortgage Insurance (LMI) and when is it required?

  LMI protects the lender if you default on your loan. It's usually required if you borrow more than 80% of the property's value (i.e., less than a 20% deposit). See our low deposit home loans page for how to get on the property ladder faster, even with a small deposit.

• How does the stamp duty work in Australian property purchases?

  Stamp duty is a government tax on property transactions, calculated based on the property’s purchase price or market value. The exact amount varies by state and the property’s value. It's a key cost to consider when budgeting for a home purchase.

• What are the stages involved in buying a home?

  The stages in buying a home include:

  • Research: Understanding what you can afford and where you'd like to buy. For more information on first home buyer loans, visit the First Home Buyer loans page.
  • Pre-Approval: Getting pre-approved for a loan to know your budget.
  • Property Search: Looking for properties that fit your criteria.
  • Making an Offer: Once you find a property, you make an offer or bid at auction.
  • Loan Finalisation: Getting your loan formally approved by the lender.
  • Property Valuation and Inspection: Ensuring the property is worth its price and has no major issues.
  • Contract Exchange: Signing the contract and paying the deposit.
  • Settlement: Completing the purchase and getting the keys to your new home. 

• Is it possible to get home finance with bad credit?

  Yes, it's possible to obtain home finance even with bad credit. Rapid Finance has a panel of specialist lenders who consider applications from those with less-than-ideal credit histories. Affordability of the loan is a key consideration. Visit our Bad Credit Home Loans page for more information and tailored solutions.

• How does my income affect my ability to get a mortgage?

  Your income determines your borrowing capacity. Lenders will assess your income against your debts and expenses to ensure you can comfortably manage the loan repayments.

• What is a good credit score for buying a house?

  A good credit score typically ranges from 600-800, with higher scores improving your chances of loan approval and better interest rates. Rapid Finance can also assist those with lower scores to find suitable financing options.

• What is a home deposit, and how much do I need?

  A home deposit is the initial payment towards the purchase of a property, usually a percentage of the total price. Ideally, you should aim for a deposit of at least 20% to avoid Lenders Mortgage Insurance (LMI), though it's possible to buy with less.

• How do I qualify for a home loan?

  To qualify, you’ll generally need a stable income, a good credit history, and usually, a sufficient deposit - but not always. Rapid Finance could assist even with unique circumstances like irregular income, low deposit home loans or past credit issues. Providing proof of income and meeting other lender criteria are essential steps.