Home Finance

October 29, 2020

Pay off your new home with the right loan.

When you decide to build your dream home, you think the hardest choice is matching your bathroom tiles to the turquoise waters of Gnarabup Beach.

Then you start looking at home loans. Suddenly the jargon is rolling in quicker than the surf at Binningup Beach. Guarantor loans, construction loans and interest-only loans – feeling overwhelmed? Before you throw in the towel, let us help you out. Read on to work out which home loan can work best for you.

Guarantor loans.

Don’t have a deposit saved? There’s a way around that and a guarantor loan could be your answer. These loans allow a relative or friend to use the equity in their home as security for your new home. Not only does the guarantee act as a deposit but there’s the added bonus of avoiding the hefty cost of lenders mortgage insurance.

This is a big commitment from the guarantor – commonly known as the bank of mum and dad. Whoever this amazing person is, you need to make sure you make your mortgage repayments – on time. But the arrangement doesn’t have to be for keeps. Once you’ve built up enough equity in your home, the lender can remove the guarantee. Timing will depend on the size of your deposit, how many repayments you’ve made and if there’s been a boost in the property value.

Construction loans.

If you’re building your first home, a construction loan might be the best option. You’ll find it’s usually a variable rate loan. Rather than borrowing the whole amount at the start, you only draw the amount needed to make progress payments to the builder at various stages of building. There are typically five stages that you need to be mindful of, being: slab down, frame, lockup, fitout and the best of all, completion stage.

During construction, you generally only pay interest, which is handy if you’re also paying rent. When your home is handed over at completion, that’s when you start paying the full principal and the interest, so be ready for the jump in repayments.

Interest-only loans.

As the name suggests, with an interest-only loan, you’re only paying off the interest, not the principal and interest (being the total amount borrowed). These are usually short-term loans for construction or bridging finance. An interest only loan is a handy solution for those who have regular living costs, credit cards or personal loans. This option frees up your cash so you can continue to lower your debt.

Helping you in each step of your new home journey.

All this talk about mortgage types doesn’t need to worry you. The Loan Co deal with this all day, every day, and are here to help whenever you need. When you’re ready,they will take the hassle out of choosing a loan, leaving you more time to enjoy the sweet life in the South West.

Want to know what our team love nothing more? We love helping people just like you find their patch in the South West to build the home of their dreams.

Because it’s our home too.