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WWYD?

December 31st, 2008 at 11:23 pm

I went into my bank to get some home loan info, and the woman gave me a few piles of paperwork to look through.
When I was leaving I asked about the no deposit home loans (as it was still on their website) and she said that they don't offer them anymore.

What a big fat waste of time!

I have made a few more enqiries to various banks and compiled some information and compared some loan features.
I also made a couple of online enquiries. One was to a bank which BF's dad has his home loan with. They sent me an email with some info. I didn't exactly understand what it was saying so I called them to ask some questions.

My first question was whether or not they do 100% loans anymore. His answer was no. I asked him if that was even if we had the money to cover Mortgage Insurance and Fees, on top of the First Home Owners Grant.
He paused for a few seconds and then asked me to tell him how much money we have saved, what we want to borrow, and our earning details. When I told him he was surprised and said that we had a 3% deposit and then some (3% deposit is $9600). I said yes, but that was to cover the Mortgage Insurance, and he said that the FHOG was designed to cover those costs, and the stamp duty and legal fees. I can't believe no one told me that! I have had all these bank people telling me different things but no one has ever said that. I was always under the impression that you got it after you bought the house, as a 'bonus' type thing (like the baby bonus).

Anyway. I am going in on Tuesday to apply for pre approval. I could have done it over the phone but I feel more comfortable doing it in person at a branch so I can explain some things.

Apparently we are able to borrow up to $510 000. I don't understand how anyone could survive on our income with a mortgage payment on $510k. It boggles the mind. I mentioned it to BF's friend, who was at our house at the time, and his response was a rather blunt 'fuck off!!??'. It's nice to know he has faith in our financial abilities. (note: sarcasm)

So that is very very exciting news for us.

The only problem I have is that I am undecided on which package we should be thinking about.

Option 1 (http://www.westpac.com.au/internet/publish.nsf/Content/PBHLPR+Fixed+Options+Home+Loan )
I am thinking that a fixed rate loan would be the way to go at the moment because the rates are down. This bank also gives you the opportunity to lock in for 10 years, which is not an option with a lot of banks (5 years is usually the max). The lock in rate at the moment is 6.99% which is pretty good (bear in mind this is Australia).
Option 2
(http://www.westpac.com.au/internet/publish.nsf/Content/PBHLPR+Rocket+Repay+Home+Loan )
The other problem is that I do also like the Rocket Repay Loan, but it doesn't allow the option of a fixed rate.

What would you do? I mean as in, what loan would you choose. (I already know most of you are not thrilled about our choice to buy a home at the moment, but that is not what is on the table here.)

Thankyou for your input! Smile

and... happy New Year!

5 Responses to “WWYD?”

  1. gamecock43 Says:

    congrats! sounds like you guys are buying a house!

  2. Amber Says:

    Good luck keep us posted. I would go with the fixed rate. I'm happy for you

  3. scfr Says:

    I don't have a strong opinion on which of the 2 options is the best, but I will suggest that if you are leaning towards Option 1, you make sure you understand the "Additional repayments" term of that loan. Does it mean that if you lock the rate for 10 years, but you decide to sell the house before 10 years have past, you will end up paying fees (penalties)? That is what it would mean here in the US. That bit I wouldn't like ... who of us can say for sure how long we will stay in a house?

    Also, don't listen to what the banker says you can afford. Go with what YOU know you can comfortably afford, and can continue to afford even if life throws you some curveballs. When we bought our last house, the bank would have gladly given us a mortgage for about double the amount that we actually took ... We never regretted passing that up and going with a much lower amount we felt comfortable with, because we never lost a moment of sleep worrying that we wouldn't be able to make our mortgage payment.

    Good luck. Continue to proceed with caution.

  4. baselle Says:

    No question for me: Fixed rate.

    Adjustable rates work really during high rates (historically, 6.99% isn't that high) - you want them to adjust down, and you get killed if they adjust up.

    Good luck - it sounds like credit is tightening in Australia also, so its a worldwide phenomenon.

  5. whitestripe Says:

    thanks for your input guys, keep it coming.
    scfr: the loan is portable, which i think may answer your question about if we sell and buy another house? and you're right, who can say how long we will stay in that house. BF thinks 1-2 years, i think 5-7 years (so knowing us - it will be about 10 years LOL!). The house we buy will no doubt be a renovator - so unless we renovate it to within an inch of its life - it's not going to be our forever home.

    oh and yes, that is one reason why i dont like option 1: the $15 000 limit on repayments over the fixed term. it just doesnt seem fair.

    i would never, EVER consider borrowing $510k on what we make now. i probably would not even consider it if we earnt twice what we earn now. i'm not that silly!


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