Buying your first home as a Tasmanian government employee comes with unique advantages, but understanding variable interest rate loans and their associated fees can feel overwhelming. Let's break down what you need to know about variable rate loans, their costs, and how to make informed decisions about your first Home Loan.
What Are Variable Interest Rate Loans?
A variable interest rate means your loan's interest rate can change during the life of your mortgage. Unlike fixed interest rate loans where the rate stays the same for a set period, variable rates move up and down based on market conditions and your lender's decisions.
For first time home buyer programs, variable rates often offer more flexibility. You might access features like:
• Offset account options to reduce interest payments
• The ability to make extra repayments without penalties
• Redraw facilities for accessing additional payments
• Potential interest rate discounts for government employees
Understanding the Fees and Costs
When applying for a home loan, several fees and costs come into play beyond the interest rate itself. Here's what you should expect:
Application and Establishment Fees
Most lenders charge between $300 to $1,000 for processing your home loan application. Some lenders waive these fees as part of first time home buyer schemes or special packages for public service employees.
Ongoing Monthly Fees
Many variable rate loans include monthly account keeping fees ranging from $8 to $15. However, these are often waived if you maintain a minimum loan amount or meet certain criteria.
Lenders Mortgage Insurance (LMI)
If your loan to value ratio (LVR) exceeds 80%, you'll likely need to pay lenders mortgage insurance (LMI). This protects the lender if you default on your loan. LMI costs vary based on your loan amount and deposit size, potentially ranging from $1,000 to $20,000 or more.
The Home Guarantee Scheme can help eligible first home buyers avoid LMI with deposits as low as 5%, making homeownership more accessible.
Ready to get started?
Book a chat with a Finance and Mortgage Brokers at Public Home Loans today.
Benefits of Variable Rate Loans for Government Employees
As a Tasmanian government employee, you have access to specific benefits that can make variable rate loans particularly attractive:
Employment Stability Recognition
Lenders view government employment favourably due to job security, potentially improving your borrowing capacity and access to better interest rate discounts.
Professional Package Discounts
Many lenders offer professional packages with reduced rates and waived fees for public sector employees. These packages often include complimentary offset accounts and fee waivers.
Flexible Repayment Options
Variable rate loans typically allow you to adjust repayments based on your financial situation, making them suitable for managing government salary structures and potential overtime variations.
First Home Owner Grants and Stamp Duty Concessions
Tasmania offers generous first home owner grants (FHOG) and stamp duty concessions that can significantly reduce your upfront costs:
• First home owner grant of up to $30,000 for new homes
• Stamp duty exemptions or reductions for eligible first home buyers
• Additional concessions for homes in certain price ranges
These benefits can effectively reduce the overall cost of buying a home, making variable rate loans more affordable even with their associated fees.
The Application Process and Getting Pre-Approved
To get pre-approved for your first investment property or family home, you'll need to provide:
- Recent bank statements (usually three months)
- Employment verification and payslips
- Details of your assets and liabilities
- Identification documents
The streamlined application process for government employees often means faster approval times, as lenders can verify employment through established channels.
Accessing Multiple Lenders and Options
Working with mortgage brokers gives you access to banks and lenders nationwide, not just local Tasmanian institutions. This broader access means:
• Comparing variable interest rates across multiple lenders
• Finding packages specifically designed for government employees
• Accessing specialist first time home buyer programs
• Understanding how different lenders assess your borrowing capacity
Making Your Decision
When choosing a variable rate loan, consider more than just the interest rate. Factor in:
• Total fees over the loan's life
• Available features like offset accounts
• Flexibility for extra repayments
• Lender reputation and customer service
• How rate changes might affect your budget
The property market conditions and your personal financial situation should also influence your choice between variable and fixed interest rate options.
Remember, what works for one first-time buyer might not suit another. Your employment with the Tasmanian government provides stability that lenders value, but your specific circumstances will determine the most suitable loan structure and features.
Understanding variable rate loan fees and costs puts you in a stronger position when buying your first home. With proper planning and professional guidance, you can make informed decisions that align with your long-term financial goals.
Call one of our team or book an appointment at a time that works for you to discuss your specific situation and explore the home loan options available to Tasmanian government employees.
