First time home buyer loans are really no different from other home loans, the trick is knowing how to choose the best home loan that suits your particular needs.

It’s like being fitted for a suit or formal gown; it has to sit well, look good and do the job properly!

But first time home buyer loans need to be carefully assessed and you need to develop a checklist of the features you want in your home loan, so let’s take a look at some of the features you might look for and why.

Six Questions To Ask When Looking at First Time Home Buyer Loans.

• Do you want the ability to make extra payments so you can pay the loan off sooner?
• Do you want an offset account so that you can minimise interest and use your excess funds more effectively?
• Are you comfortable with a variable rate interest loan or do you need the certainty of a fixed rate?
• Will you have enough cash to cover all your costs? Come to think of it, do you know what costs you are up for?
• Do you like the flexibility of a line of credit or is a normal principal and interest loan better for you?
• Are you only looking for the cheapest interest rate or do you want some special features that you are prepared to pay a little more for?

These six questions are certainly not meant to be an exhaustive list but they will certainly start you thinking about some important issues. In fact, these questions are really important because it makes you examine your current circumstances and be really clear about what direction your home loan will take.

For instance, it will raise your awareness of some other personal issues that could impact upon your choice of home loans. So, in addition to the above six questions let’s look at more personal matters to see where that leaves us.

First Time Home Buyer Loans – Some Personal Choices.

• Are you thinking of starting a family in the next four or five years?
• Do you anticipate a change in income, either up or down that could affect your ability to make the minimum monthly repayments?
• Are you planning a long holiday or another major purchase that will require you to save a large amount of money?
• Have you established a budget so you can be certain that you are able to comfortably make the minimum repayment required by a home loan?
• Do you have any other large debts you need to pay off first, for example education expenses or loans to friends and family?
• Do you have any plans to start your own business?

Once again, your answers to these questions will clarify the decisions you need to make when choosing which first time home buyers loans will suit your individual needs.

Here are some reasons why these questions are important.

If you anticipate a change in income either by starting a family or changing careers you will need to do a budget to ensure you still have adequate income to meet your home loan repayment requirements. Alternatively, you might want to consider the certainty that comes with a fixed rate home loan so you won’t have to worry about interest rates going up.

Although there are many other questions to be answered when it comes to choosing a fixed rate home loan, the certainty you can enjoy the may outweigh some of the other disadvantages.

I will outline some of the features of fixed home loans in another post but if you want to know the ins and outs of them now, just sign up for my home loan tips on the right-hand side of the page and I’ll send you some free information sheets to help you.

The other questions all centred around managing your cash flow. The importance of this can’t be stressed too much. It is absolutely vital to manage your cash flow at every stage of your life but it is even more important when you are considering which type of home loan will be best.

Although most borrowers find it a pain in the neck to sit down and do a budget, it will be the best few hours you spend before choosing a home loan. It is a simple fact that borrowers who do not have a handle on their finances can easily overcommit themselves and end up having to sell our house just to relieve the burden.

This can be a devastating event in anyone’s life so that’s why it is absolutely vital to take some time in the early stages of planning your financial future to do a budget and establish a set of controls that can last you the rest of your life.

Now let’s cover some of the features we mentioned in the first part of this article.

1.       Most principal and interest type home loans allow you to make extra repayments whenever you wish, either on a regular monthly basis or through cash instalments from time to time. Some banks however can charge fees for these transactions so you need to take this possibility into account. Fixed rate home loans are much more restrictive and you may not be able to make extra payments as freely as you wish.

2.       Offset accounts are an enticing marketing method used by many banks to encourage people to place cash in an account which offsets the interest charged on their home loan. Remember however that most of these offset accounts attract monthly account keeping fees and you will be surprised to learn that even a modest monthly fee can drastically reduce the effectiveness of an offset account. In other words, don’t be seduced by how good it sounds.

3.       It’s really important to know exactly what a home loan is going to cost you from the get go. You need to sit down with a mortgage broker or solicitor who can work out all these costs for you so that you can factor in things like lenders mortgage insurance, application fees, ongoing monthly fees, settlement fees, legal fees, government charges, stamp duty, and any other fees that might be charged in your circumstances.

4.       The difference between a line of credit and a normal principal and interest home loan needs to be clearly explained to you before you make your decision. I will detail the ins and outs of lines of credit in another post.

Finally, when choosing a home loan on the basis of interest rates it is vital that you take into account all of the other associated ongoing monthly fees, or yearly fees, that apply to the loan you are looking at. It is easy to be caught out choosing a cheap home loan believing that you are saving money.

As you will see from my other posts, some loans with a high rate of interest are actually cheaper because they do not have ongoing monthly fees which can drastically affect your total repayments.

First time home buyer loans need not present you with a difficult choice if you plan carefully and talk to a mortgage broker to get a clear picture.

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