2. Confirm Your Borrowing Capacity and Set Realistic Goals

Why it matters:
Understanding how much you can borrow prevents disappointment and keeps your property search grounded.

How to work this out:

• Use online calculators or speak with a mortgage broker.
• Consider your income, expenses, debts, and savings.
• Remember, lenders typically cap loans at around 80-90% of the property value unless you pay Lenders Mortgage Insurance (LMI), which I’ll explain next.

Scenario:
Suppose you earn AUD 100,000 annually and have AUD 30,000 in savings. You might be eligible for a loan of AUD 600,000. Starting your property search within this range is wise.

Tip:
Factor in additional costs such as stamp duty, legal fees, and moving expenses. These can add significantly to your budget.

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3. Understand and Budget for Lender’s Mortgage Insurance (LMI)

What is LMI?
LMI protects the lender if you default on your loan. It usually applies if your deposit is less than 20% of the property price.

How it affects you:

• LMI can add thousands to your costs—often between 2-4% of the loan amount.
• You can choose to pay it upfront or add it to your loan amount.

Example:
On a AUD 500,000 loan with a 10% deposit (AUD 50,000), LMI might cost around AUD 15,000 to AUD 20,000. Some lenders allow you to include this in your mortgage, spreading out the cost.

Pro tip:
If you have savings of over AUD 150,000, consider saving a larger deposit to avoid LMI altogether. This reduces your overall borrowing cost.

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4. Explore Different Types of Loans and Interest Rates

Fixed vs. variable interest rates:

• Fixed rates lock your payments for a set period—great for budgeting.
• Variable rates can fluctuate with the market—potentially lower over time but riskier.

Interest-only vs. principal and interest:

• Interest-only loans lower initial payments but won’t reduce your debt.
• Principal and interest loans gradually reduce your debt over time.

Comparing lenders:
Interest rates vary slightly among lenders. Even 0.1% can save or cost you thousands over the loan term.

Insight:
As of 2025, the Reserve Bank of Australia (RBA) has kept rates relatively steady, but slight fluctuations are possible. Locking in a fixed-rate mortgage could shield you from future rate hikes.

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5. Regularly Review and Refinance Your Loan

Why it’s crucial:
Your financial situation or market conditions can change, making refinancing a smart option.

Refinancing benefits:

• Secure a lower interest rate.
• Switch from variable to fixed rates or vice versa.
• Access equity for renovations or investments.

When to consider refinancing:

• When interest rates are lower than your current rate.
• If your credit score improves.
• When your income increases, boosting your borrowing capacity.

Important:
Carefully compare upfront costs, fees, and potential savings before refinancing.

Real-world tip:
Many clients have saved thousands by refinancing within the first few years of their loan. Always consult a trusted mortgage broker to analyze if refinancing makes sense.

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Extra Tips to Maximize Your Home Loan Success

• Stay informed about the latest lending policies and government schemes.
• Build your credit score by paying bills on time and reducing debts.
• Save consistently for deposits and additional costs.
• Seek professional advice from mortgage brokers familiar with international clients and complex financial backgrounds.

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Final Words

Making these resolutions helps you build a solid foundation for property ownership in Australia. Remember, navigating the mortgage landscape can seem daunting, especially for newcomers. But with preparation and the right guidance, you can achieve your homeownership goals this year.

“The secret to getting ahead is getting started.” – Mark Twain

Take that first step today. Review your documents, set realistic goals, and consult with experts who understand your unique situation. Your new home awaits in 2025!