Ease the squeeze: Three winning weapons for first home buyers

Attention first home buyers: the squeeze is on. You’re in danger of borrowing too much for an over-priced home. But don’t despair. Mozo’s money experts give you three weapons that never fail to bust through market hype and deliver happy home ownership.

‘Don’t have ants in your pants’. That’s the message from Australia’s Reserve Bank to anyone hopping around town madly shopping for their first mortgage and first home. Wait… Hold off… Be patient… Just not the words you want to hear when you’re hell-bent on pursuing that great Aussie dream of home ownership.

House prices are hot at the moment, especially in our major cities. Price hikes are being fuelled by investors and trade-up buyers (those moving from their humble first home to bigger, better digs). Lenders are fanning the flames by being soft on investors and trade ups when approving loans.

Home Loan Comparison Table - rates updated daily

Search promoted home loans below or do a full Mozo database search. Advertiser disclosure.
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    Mozo Experts Choice 2021
    Smart Booster Home Loan

    2 Year Discounted Variable Rate, Owner Occupier, Principal & Interest, <70% LVR

    interest rate
    comparison rate
    Initial monthly repayment
    1.85% p.a.variable for 24 months and then 2.25% p.a. variable
    2.21% p.a.

    A hot new super low introductory rate home loan for two years with no monthly or ongoing fees. loans.com.au has some of the fastest settlement times on the market. They can meet 30-day settlement timeline so you can start saving thousands, as soon as possible! Mozo award-winning online lender, friendly and local Australian based team. min 30% deposit.

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    Details
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    UHomeLoan (1 Yr Fixed)

    Owner Occupier, Principal & Interest

    interest rate
    comparison rate
    Initial monthly repayment
    1.75% p.a.
    fixed 1 year
    2.31% p.a.

    Fast, easy apply and no ongoing fees. Choose between weekly, fortnightly or monthly repayments. 1 year fixed rates are for new Owner Occupier Principal & Interest loans.

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    Details
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    Mozo Experts Choice 2021
    Celebrate Variable Home Loan

    <60% LVR, Owner Occupier, Principal & Interest

    interest rate
    comparison rate
    Initial monthly repayment
    1.99% p.a. variable
    1.99% p.a.

    Fast and efficient online application. Automatic discounts as loan is paid off. Free extra repayments and redraw facility. Zero fees to consider. Min 40% deposit required. Winner of three Mozo Expert's Choice Awards for 2021.

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    Details
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    Basic Home Loan

    Fixed, Owner Occupier, Principal & Interest, LVR<70%

    interest rate
    comparison rate
    Initial monthly repayment
    2.09% p.a.
    fixed 3 years
    2.32% p.a.

    Get a flexible loan structure with up to six loan accounts with different rate types. Make free extra repayments. Enjoy free redraw facility. No upfront or ongoing fees. Option to earn Qantas points.

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    Details
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    Fixed Rate Loan with Orange Advantage

    Owner Occupiers, Principal & Interest, LVR <80%

    interest rate
    comparison rate
    Initial monthly repayment
    1.84% p.a.
    fixed 2 years
    3.73% p.a.

    Know exactly what your repayments will be, and you can fix your rate for up to 5 years. No monthly, annual fee or transaction fees.

    Go to site
    Details

Should you accept the Reserve Bank’s advice and keep renting until conditions improve or should you just cross all your fingers and toes and go for it? Fortunately there’s a third option. It’s more like taking the stairs into the shallow end of the Olympic pool than diving off the 10-metre board, but we’re confident it will give you the desired outcome without stretching your budget to the point of snapping.

Just use our Mozo money experts’ three weapons for first home buyers and you’ll be sure to win the fight against market hype and price hikes:

Weapon #1: Keep your head so you don’t lose your shirt

If you simply cannot wait, if that hard-saved deposit is burning a hole in your wallet, or you really have found the perfect property, then make CALM your mantra. Be Zen, practice mindfulness meditation, do whatever you need to do to make sure you don’t get sucked into the hype of the boom.

Don’t believe what the first mortgage broker or banker says you can afford to borrow. Yes, they’ll add a buffer to make sure you could cope with a 2% rate rise, but can you really believe their numbers? Our experts say “No!” Go straight to Weapon #2 and learn how to do your own calculations and set realistic limits.

Avoid auctions. When property is hot, auctions will be popular. Send someone else to do your bidding – someone whose heart is not set on that post-Federation California bungalow like the one next door to Gatsby’s. Eliminate all emotion from the transaction so you don’t end up with more debt than you can realistically manage.

Weapon #2: Can you afford it? Really?

Lenders reassure us that very few Australian home buyers are in debt over their heads. Most, say the lenders, are managing their mortgages comfortably and even have healthy redraws, which means they are paying back their homes at more than the minimum the bank/lender expects them to pay each month.

The trick is to make sure you join the ranks of the clever borrowers and that means taking extra special care when rates are really low (like they are now) and prices are a bit on the high side (like they are now)!

“Oh yawn,” we hear you say. “They’re going to tell me I need a budget.” Yep, too right, but if you’ve managed to save a deposit, you’re already savvy enough to know what you earn and exactly what it costs to live. Now separate needs and wants, and decide what you could live without. How much more than what you currently pay out in rent could you afford to pay off a mortgage without feeling financially stressed?

Let’s say a couple is paying $650 per week rent for an inner Sydney one-bedroom house. That’s $2817 per month. Without making any lifestyle changes they could afford to borrow around $420,000 over 25 years at an interest rate of 6.5%. The median house price in Australia is around $460,000, so with a $40,000 deposit, this couple looks ready to buy.

That’s a very different way to look at how much you can afford to borrow from the method lenders will use to give home loan pre-approval. However, it gives you a street-smart ballpark figure to keep in mind before you start talking to brokers, applying for pre-approval or looking for properties.

Weapon #3: Shop (around) til you drop

Save the biggest deposit you possibly can before you start shopping for a home loan. It’s the best way to impress lenders. Then shop around to beat the lenders at their own game. Use Mozo's home loan comparison hub, don’t just talk to one bank like your parents probably did.

Do your research to make sure you find the most competitive rate with no upfront or ongoing fees. Interest rates won’t stay at 50 year lows forever. Make sure you get the very best deal today to take advantage of cheap rates for as long as they last. So long as you keep your head and stay within your borrowing comfort zone, you’ll be a careful and happy home owner before you know it.

* WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. The comparison rate displayed is for a secured loan with monthly principal and interest repayments for $150,000 over 25 years.

** Initial monthly repayment figures are estimates only, based on the advertised rate, loan amount and term entered. Rates, fees and charges and therefore the total cost of the loan may vary depending on your loan amount, loan term, and credit history. Actual repayments will depend on your individual circumstances and interest rate changes.

^See information about the Mozo Experts Choice Home Loan Awards

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