Planning your finances before applying for a home loan can make the difference between securing your dream property or missing out. For Tasmanian government employees, understanding how your financial situation impacts your borrowing capacity is crucial when buying a home.
Understanding Your Financial Position
Before you start looking at property market listings, take stock of your current financial situation. This includes reviewing your income, expenses, savings, and existing debts. As a government employee, your stable employment can work in your favour during the Home Loan application process.
Lenders will examine your bank statements to assess your spending patterns and savings ability. They'll also consider factors like:
• Your regular income and employment history
• Monthly expenses and living costs
• Existing debts and credit commitments
• Savings for deposit and associated costs
Calculating Your Borrowing Capacity
Your borrowing capacity determines the loan amount you can access from banks and lenders across Australia. This calculation considers your income, expenses, and the loan to value ratio (LVR) you're comfortable with.
Most lenders prefer an LVR of 80% or less to avoid lenders mortgage insurance (LMI). However, if you need to borrow more, LMI can still make homeownership possible – it just adds to your overall costs.
When calculating home loan repayments, consider both current rates and potential future changes, especially if you're looking at variable home loan rates.
Choosing Between Fixed and Variable Rates
Home Loan Rates come in two main types:
Fixed Interest Rate Home Loans lock in your interest rate for a set period, usually one to five years. This provides certainty for budgeting but means you won't benefit if rates fall.
Variable Interest Rates can fluctuate with market conditions. While this creates some uncertainty, you might access interest rate discounts or benefit from rate cuts.
Many borrowers choose a split loan, combining both fixed and variable portions to balance stability with flexibility.
Ready to get started?
Book a chat with a Finance and Mortgage Brokers at Public Home Loans today.
Planning for Additional Costs
Buying a home involves more than just the purchase price. Factor these costs into your financial planning:
• Stamp duty (varies by state and property value)
• Legal and conveyancing fees
• Building and pest inspections
• Loan application and establishment fees
• Moving and connection costs
In Tasmania, first-home buyers may be eligible for stamp duty concessions, which can significantly reduce upfront costs.
Getting Pre-Approved
Home Loan pre-approval gives you confidence when house hunting. The streamlined application process involves submitting your financial documents and getting conditional approval for a specific loan amount.
Pre-approval helps you:
• Understand your budget before viewing properties
• Act quickly when you find the right home
• Negotiate with confidence at auctions
• Identify any issues with your application early
Exploring Your Home Loan Options
With access to Home Loan options from banks and lenders across Australia, you don't need to settle for your everyday bank's offering. Different lenders offer various features like:
• Offset accounts to reduce interest payments
• Redraw facilities for accessing extra repayments
• Professional package discounts
• Flexible repayment options
Building Home Equity Over Time
Once you secure your home loan, your financial planning shouldn't stop. Building home equity through regular repayments and property value growth creates future opportunities for:
• Refinancing to better rates
• Accessing equity for renovations or investments
• Reducing your LVR and eliminating LMI
Regular reviews of your loan ensure you're still getting value as your circumstances change.
Making Your Application Count
The application process requires careful preparation. Having your documents organised and understanding lender requirements can speed up approval times. Consider working with specialists who understand the unique benefits and challenges facing public service employees.
Your stable government employment, regular income, and access to specific employee benefits can strengthen your application and potentially unlock better terms.
Taking control of your financial planning puts you in the driver's seat when it comes to securing your home loan. With proper preparation and the right guidance, homeownership becomes an achievable goal rather than a distant dream.
Call one of our team or book an appointment at a time that works for you to discuss your home loan options and create a financial plan that fits your situation.
