Why Purchasing a Unit Makes Sense in Western Australia
Units and apartments have become increasingly popular among Western Australians looking to achieve home ownership without the maintenance demands of a traditional house. Whether you're looking at Perth's coastal suburbs or inland areas, purchasing a unit can be a smart move towards financial stability and building equity.
When it comes to securing finance for a unit, understanding your home loan options is crucial. The process differs slightly from purchasing a house, and knowing these differences can help you make informed decisions about your first home loan or next investment property.
Key Differences When Applying for a Home Loan on a Unit
Lenders assess units differently than houses, which affects your loan application. Here's what you should know:
Loan to Value Ratio (LVR) Considerations
Banks and lenders across Australia typically prefer lower LVRs for units compared to houses. While you might secure 95% lending on a house, units often require a larger deposit. This impacts whether you'll need to pay Lenders Mortgage Insurance (LMI), which protects the lender if you default on your loan.
Most lenders cap unit loans at 90-95% LVR, and some won't lend on units above certain levels or in buildings with specific characteristics. Understanding these requirements before you apply for a home loan can save time and disappointment.
Strata Reports and Building Considerations
Unlike standalone houses, units come with strata schemes and body corporate arrangements. Lenders will review:
- Strata reports and financial health of the body corporate
- Building insurance coverage
- Planned maintenance and sinking fund adequacy
- The number of owner-occupied versus investment properties in the complex
These factors influence your borrowing capacity and the interest rate you'll receive.
Understanding Your Home Loan Products and Packages
When purchasing a unit, you'll have access to various home loan features and home loan benefits. Let's break down the main options:
Variable Rate Home Loans
A variable rate loan means your interest rate can fluctuate based on market conditions. The advantages include:
- Potential interest rate discounts during rate reduction periods
- Flexibility to make extra repayments
- Access to features like an offset account or linked offset
- Ability to redraw funds if needed
Variable home loan rates currently differ significantly between lenders, making a home loan rates comparison worthwhile.
Fixed Interest Rate Home Loans
With a fixed rate, your interest rate remains unchanged for a set period (typically 1-5 years). This provides:
- Certainty for calculating home loan repayments
- Protection against rising rates
- Clear budgeting for your owner occupied home loan
The trade-off? Less flexibility and potential break fees if you need to refinance early.
Ready to get started?
Book a chat with a Finance Broker at Shoreside Finance today.
Split Loan Options
A split loan combines both variable and fixed interest rate portions, giving you:
- Stability from the fixed component
- Flexibility from the variable portion
- Balanced exposure to rate movements
This option works well if you want to secure future financial stability while maintaining some flexibility.
Principal and Interest vs Interest Only
You'll need to choose your repayment structure:
Principal and Interest Repayments
This traditional approach means you'll build equity from day one. Each payment reduces your loan amount and covers the interest charged. This is standard for owner-occupied properties and helps you:
- Own your property sooner
- Pay less interest over the loan term
- Improve borrowing capacity for future purchases
Interest Only Repayments
With interest only loans, you pay just the interest for a set period (usually 1-5 years). While your repayments are lower initially, you won't reduce the loan amount during this time. This structure is more common for those looking to invest in property.
Home Loan Features That Add Value
Offset Account Benefits
A mortgage offset account can reduce the interest you pay. Your savings in the offset account are calculated against your loan balance, meaning you pay interest only on the difference. For example, with a $400,000 loan and $50,000 in your offset, you only pay interest on $350,000.
Portable Loan Flexibility
A portable loan lets you transfer your existing home loan to a new property without breaking your contract. This protects you from rate discount losses and potential break fees if you decide to upgrade or relocate.
Redraw Facilities
Making extra repayments and having access to redraw those funds provides financial flexibility while still reducing your interest charges.
Getting Home Loan Pre-approval
Before you start searching for your perfect unit, consider getting Home Loan pre-approval. This process:
- Confirms your borrowing capacity
- Shows sellers you're a serious buyer
- Helps you compare rates from multiple lenders
- Identifies any potential issues before you make an offer
At Shoreside Finance, we can access Home Loan options from banks and lenders across Australia, ensuring you see current home loan rates and find suitable home loan packages for your situation.
Tips for Western Australian Unit Buyers
- Research the location thoroughly - Coastal areas like Hillarys, Trigg, and Ocean Reef have different market dynamics than inland suburbs
- Review the strata report carefully - High levies can impact your ability to need lower repayments
- Consider future resale - Units in well-maintained complexes hold value
- Factor in all costs - Strata fees, council rates, and insurance add to your monthly expenses
- Compare rates thoroughly - Even small differences in your home loan interest rate can mean thousands in savings
Common Questions About Unit Purchases
Will I get the lowest rates on a unit loan?
Interest rates on units are generally similar to houses, though some lenders offer slightly different pricing. Your actual rate depends on your deposit size, credit history, and the specific property.
Can first home buyers get assistance when purchasing a unit?
Absolutely. Various government schemes support those purchasing their first home, whether it's a house or unit. We can guide you through available options and help with your first home buyer application.
How does Lenders Mortgage Insurance (LMI) affect unit purchases?
LMI costs are calculated based on your LVR. With units sometimes requiring larger deposits, understanding these costs early helps with budgeting.
Why Work With a Mortgage Broker
When purchasing a unit in Western Australia, having expert support makes a significant difference. At Shoreside Finance, we:
- Access home loan products from numerous lenders
- Help you understand complex home loan features
- Assist with calculating home loan repayments across different scenarios
- Guide you through the home loan application process
- Ensure you understand your borrowing capacity
- Support you whether you're buying an owner occupied home loan or looking to invest in property
We serve clients throughout Perth's northern suburbs and beyond, including those in Karrinyup, Mindarie, Duncraig, and surrounding areas.
Taking the Next Step
Purchasing a unit is an achievable goal with the right planning and support. Understanding your home loan options, comparing rates effectively, and choosing the right home loan features for your circumstances sets you up for success.
Whether you're ready to apply for a home loan or want to explore your options with a loan health check, professional guidance can save you time and money.
Ready to discuss your unit purchase and explore suitable home loan solutions? Call one of our team or book an appointment at a time that works for you. We're here to help Western Australians achieve home ownership and secure their financial future.