Variable Rate Loans: What First Home Buyers Need to Know

Getting Started with Your First Home Loan Application

As a FIFO worker in Western Australia, buying your first home is an exciting milestone. But when you're looking at home loan options, the terminology around variable interest rate loans, fees, and costs can feel overwhelming. Let's break down what you actually need to know about variable rate loans and what they'll cost you.

A variable interest rate loan means your interest rate can move up or down based on market conditions and lender decisions. Unlike a fixed interest rate that stays the same for a set period, your repayments on a variable rate can change. For FIFO workers with irregular rosters, understanding how these changes might affect your first home buyer budget is crucial.

Why FIFO Workers Often Choose Variable Rate Loans

Variable rate loans come with flexibility that can work well for FIFO income patterns. Here's what makes them appealing:

• Access to an offset account to park your earnings between swings
• Redraw facilities to access extra repayments when you need them
• Ability to make unlimited additional repayments without penalties
• Option to refinance without break costs
• Potential to benefit from interest rate discounts when rates fall

These features matter when you're earning solid money on site but want control over your finances during your time off.

Understanding the Fees and Costs

When you apply for a home loan, you'll encounter several types of fees. Let's talk about what to expect:

Application Fees

Some lenders charge between $0 and $1,000 to process your first home loan application. Many lenders have removed these fees, but it's worth checking during your home loan application process.

Ongoing Monthly Fees

Most variable rate loans charge a monthly account keeping fee, typically between $10 and $15 per month. Over a 30-year loan, this adds up, so factor it into your calculations.

Lenders Mortgage Insurance (LMI)

If you're borrowing more than 80% of the property value, you'll likely need to pay Lenders Mortgage Insurance (LMI). This protects the lender if you can't make repayments. LMI can cost anywhere from a few thousand to tens of thousands of dollars depending on your deposit size.

The good news? As a FIFO worker, you might qualify for LMI waivers with certain lenders who recognise your stable income.

Low Deposit Options for First Home Buyers

You don't always need a 20% deposit. Several low deposit options exist:

5% Deposit Options

The First Home Loan Deposit Scheme helps eligible first home buyers purchase with a 5% deposit while avoiding LMI. The Regional first home buyer Guarantee is another option if you're buying outside major cities in WA.

10% Deposit Options

Many lenders will accept a 10% deposit from first home buyers, though you'll still pay LMI. Some FIFO workers combine their savings with a gift deposit from family to reach this threshold.

First Home Buyer Grants and Concessions in WA

Western Australia offers valuable support for first home buyers:

First Home Owner Grants (FHOG)

You may be eligible for first home owner grants when building or buying a new home. The grant amount and eligibility criteria are set by the WA Government.

Stamp Duty Concessions

First home buyer stamp duty concessions can save you thousands in upfront costs. For properties under certain price thresholds in WA, you might receive full or partial stamp duty exemptions.

Additional Features Worth Considering

Offset Accounts

An offset account is a transaction account linked to your home loan. Any money in this account offsets the balance you're charged interest on. If you have $20,000 in your offset and owe $400,000 on your home loan, you only pay interest on $380,000.

For FIFO workers who accumulate cash between swings, this can save thousands in interest.

Redraw Facilities

A redraw facility lets you access any extra repayments you've made above the minimum. This gives you a safety net if unexpected expenses pop up during your time off site.

Your First Home Buyer Checklist

Before you apply for a home loan, make sure you've got:

1. At least 3-6 months of payslips showing your FIFO income
2. Bank statements demonstrating genuine savings
3. Details of any existing debts or financial commitments
4. Proof of identity and residency documents
5. Information about the property you want to purchase

Getting Pre-Approval

Pre-approval is a crucial step in your first home buyer journey. It tells you how much you can borrow and shows sellers you're serious. For FIFO workers, pre-approval also lets lenders assess your unique income situation properly.

Pre-approval typically lasts 3-6 months and doesn't lock you into a specific property or lender.

Understanding First Home Buyer Eligibility

To qualify as a first home buyer, you generally:

• Must not have previously owned property in Australia
• Need to move into the property within 12 months
• Must use it as your primary residence
• Cannot have previously used first home buyer grants

FIFO workers sometimes worry about the residency requirement when they're on roster, but living in the property during your off-swing typically satisfies this condition.

The First Home Super Saver Scheme

The first home super saver scheme lets you save money inside your superannuation fund with tax benefits, then withdraw up to $50,000 (including earnings) to put towards your first home deposit. This can accelerate your savings timeline.

Making Your Decision

Choosing between variable and fixed interest rates depends on your circumstances. Variable rates offer flexibility and features that suit FIFO lifestyles, while fixed rates provide payment certainty.

Many FIFO workers find variable rates work well because they can make extra repayments during high-earning periods on site, then use redraw or offset funds during time off if needed.

Buying your first home as a FIFO worker comes with unique considerations. Your irregular roster and above-average income create specific needs that not all lenders understand.

At FIFO Home Loans, we specialise in home loans for Western Australia FIFO workers. We know how to present your income to lenders, understand the concessions you're entitled to, and can help structure your loan to suit your roster pattern.

Whether you're looking at a 5% deposit, 10% deposit, or something in between, we'll work through your first home buyer eligibility and find home loan options that fit your situation.

Call one of our team or book an appointment at a time that works for you - even if you're currently on site. We're here to help you get into your first home.