Buying property is never easy, and in most cases, Aussies need to obtain a home loan in order to step into their dream house.
Below, we explain how to get a home loan in Australia and go over the factors that come into play when applying for one.
Let’s get to it!
How to Get a Home Loan in Australia?
What documents do I need for a home loan in Australia? Where do I apply, and what are my chances of being approved for one? We answer these and more questions below.
1. Reviewing the Requirements for a Home Loan in Australia
Ensuring you meet the applicable home loan requirements before contacting lending institutions will significantly accelerate and simplify the application procedure:
- Identification documents—two forms of identification, including one photo ID, such as a passport, and anything from a birth certificate to a Medicare card;
- Income requirements—if you are not receiving your salary with the lender where you are applying you will also need a recent payslip (covering three continuous months);
- Those receiving another type of income will need the corresponding proof such as tax returns, ATO statements, lease agreements, or other bank statements.
- Good credit score—the first factor banks consider is your current credit report to determine whether or not you are a trustworthy lendee;
- Everyday expenses—review your monthly transactions and provide a detailed account of your current and future living expenses, including rent, food, schooling, etc.;
- Additional financial information—to determine whether or not you can repay the loan on time, lenders will also require a list of your other assets and liabilities;
- Property details—contract of sale, approved building plans, and other building permits, so the lender verifies you will spend your loan correspondingly;
- Proof of insurance—documents about your insurance policies, especially home insurance as it might be a crucial requirement towards a successful application;
- Saved house deposit—some lenders will require you to have saved between 5% to 20% of the house purchase price before applying for a loan.
Note: When inquiring how to get home loans with specific lending institutions, you may be asked to meet a slightly different set of requirements, depending on your situation.
- Those receiving another type of income will need the corresponding proof such as tax returns, ATO statements, lease agreements, or other bank statements.
Unlike the requirements for a standard home loan, low doc loans are more restrictive than standard residential loans due to the higher risk for the lender.
2. Applying for a Home Loan in Australia
The average home loan debt in Australia is $456,000, but you can avoid becoming one more statistic by carefully choosing the right loan for you that you can pay back in time.
First, you have to compare the offering of several banks and lending institutions, especially in terms of interest rates and the number of instalments you will be expected to pay. Then, after choosing a loan product that best suits your needs, you can start the application process.
Most reputable lenders allow you to apply for your loan online in around 15 minutes, after which they will review your request and send you an offer. However, even if you are unable to finalise the process remotely, you can always visit the lender’s branch to do it in person.
Finally, after signing the necessary documents, the lender will transfer the funds to your account so you can complete the house purchase and become a homeowner.
Note: Engage the services of a professional mortgage broker for assistance in finding the best home loan or use a home loan calculator to see how much you will pay per month.
Types of Home Loans offered in Australia
Now that you know how to get a home loan, let’s look at the different types of loans Aussies can apply for and the circumstances under which they are best used:
Some lenders may also differentiate their offering based on whether it comes with fixed or variable interest rates, whether you are only paying the interest (the principal can be paid irregularly at a later date), whether you have split the loan into a fixed rate and variable rate portion, and whether you are putting up existing property as collateral.
Did you know: Only 36,1% of Aussies between 25 and 29 years of age are homeowners; that leaves roughly 60% of young adults still living in rented homes.
Tips on How to Get Approved for a Home Loan
When applying for a home loan in Australia, you can improve your chances of getting one, and with much more favourable conditions to boot, by following these tips and tricks:
- Choose the right type of loan—before initiating any official loan procedure, decide on the loan product that meets all your financial needs;
- Go for a shorter loan term—if financially viable, apply for a loan that you can pay off faster to avoid financial losses on accrued interest;
- Find the lowest interest fees—save thousands of dollars by reviewing your loan options to pick one with the lowest interest percentages;
- Pick the type of interest ratе—while fixed rates provide stability in terms of the payments amount, getting riskier variable-rate loans may lead to additional savings in the long term, provided economic changes lead to lower rates;
- Opt out of additional features—loan products that come packed with extra features (split rates, interest-only, etc.) will naturally offer higher interest rates;
- Identify your borrowing capability—be realistic of what you can afford and never exceed your ions as a simple interest hike may get you into a lot of trouble;
Note: Get more home loan tips to increase your savings in our thorough article on the topic.
Bottom Line
You now probably have your answer to questions such as: “Is it hard to get a home loan in Australia?” and “What do you need for a home loan in Australia?”. Ultimately, while you will most likely be able to get financing under most circumstances, you should still remember to apply sound judgment in picking the right credit option to ensure you can pay it back on time.
1.How much deposit is needed for a home loan?
To ensure the best loan conditions, aim to save at least 20% of what you intend to pay for your new house, even though some lenders accept as low as a 5% deposit.
2.What is lender’s mortgage insurance (LMI)?
The lender’s mortgage insurance (LMI) policy benefits the lender and is taken out in the event the loanee is at risk of not paying back his or her outstanding loan balance.
3.How can I buy a house with no money in Australia?
If you need money to purchase a house and/or have trouble securing a loan to do just that, you may be eligible for a guarantor loan, use existing property as collateral, or ask for financial help from a partner or a parent.
4.What documents do home loan lenders need to see?
Depending on your exact circumstances and the type of loan you are getting, your lender may require you to submit various documents, with a photo ID being mandatory in all cases. For more information, check out the “How to Get a Home Loan in Australia” section.