6 things to know before taking out a home loan

Published on November 24th, 2020
  Written by 
Bill Tsouvalas
Bill Tsouvalas is the managing director and a key company spokesperson at Savvy. As a personal finance expert, he often shares his insights on a range of topics, being featured on leading news outlets including News Corp publications such as the Daily Telegraph and Herald Sun, Fairfax Media publications such as the Australian Financial Review, the Seven Network and more. Bill has over 15 years of experience working in the finance industry and founded Savvy in 2010 with a vision to provide affordable and accessible finance options to all Australians. He has built Savvy from a small asset finance brokerage into a financial comparison website which now attracts close to 2 million Aussies per year and was included in the BRW’s Fast 100 in 2015 as one of the fastest-growing companies in the country. He’s passionate about helping Australians make financially savvy decisions and reviews content across the brand to ensure its accuracy. You can follow Bill on LinkedIn.
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Making the move from renting a home to owning a home is something many Australians will have to face at some point in their lives. It pays to brush up on your mortgage knowledge to make the process a smooth one. These helpful tips can let you know what to expect before you apply and what to look out for during the application process to make your journey of owning a home easier.

1. Check your credit

Your credit report and credit score are crucial elements in the home loan application process. Checking your credit score and your credit report can ensure that there are no kinks in the application process. A good credit score, which ranges from 700 and above, can improve your chances of being approved. You can also access your credit report for free to check for any errors or arrears that need to be sorted before applying.

2. Find out how much you can afford

According to KPMG, 64% of Australians are planning to take out a home loan in the next two years to buy a home. However, out of this group, some Australians will make the mistake of purchasing too much home which can affect their mortgage repayments. To avoid making this common mistake you can speak to a broker or a financial advisor who can help you understand what will work for your finances. You can also assess how much your mortgage payments are relative to your income. This can be done by using a mortgage calculator to see if you will be able to meet the repayments.

3. Jargon busters

If reading through a few of your home loan application term and conditions leave you scratching your head, you can breathe a sigh of relief knowing that you are not the only one. Home loan jargons are a few things that can throw consumers off, but our helpful Jargon busters can help you understand some of the key terminologies that will affect your home buying process.

4. First home owner incentives

Cracking the Australian property market is hard, especially if you are still saving towards a sizeable deposit. There are grant incentives set by the government to help first time home owners get a foot on the property ladder. The size of the grant will vary from state-to-state and the type of home you are purchasing. For example, in NSW offers grant amounts of up to $10,000 and if the property is valued up to $650,000 it can be exempt from stamp duty. You can check with your state to see what incentives apply to you.

5. Check the home loan features

Knowing which home loan features to choose can help you manage your mortgage repayments in future. Most home loans come at a 30-year fixed rate and can be beneficial for people who are planning to stay in their property for more than 5 years. Other features to look for when choosing a home loan is an offset account and redraw facility which can come in handy for paying off your home loan and other home expenses later on.

6. Saving up for a deposit

To ease the repayments on your mortgage you should open a savings account to build a sizeable deposit. This can lower the amount that you will need to borrow and also show lenders that you are financially prepared to start your journey to owning a home.

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This guide provides general information and does not consider your individual needs, finances or objectives. We do not make any recommendation or suggestion about which product is best for you based on your specific situation and we do not compare all companies in the market, or all products offered by all companies. It’s always important to consider whether professional financial, legal or taxation advice is appropriate for you before choosing or purchasing a financial product.

The content on our website is produced by experts in the field of finance and reviewed as part of our editorial guidelines. We endeavour to keep all information across our site updated with accurate information.

Approval for home loans is always subject to our lender’s terms, conditions and qualification criteria. Lenders will undertake a credit check in line with responsible lending obligations to help determine whether you’re in a position to take on the loan you’re applying for.

The interest rate, comparison rate, fees and monthly repayments will depend on factors specific to your profile, such as your financial situation, as well as others, such as the loan’s size and your chosen repayment term. Costs such as broker fees, redraw fees or early repayment fees, and cost savings such as fee waivers, aren’t included in the comparison rate but may influence the cost of the loan. Different terms, fees or other loan amounts may result in a different comparison rate.

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