Understanding Unit Purchases for ADF Members
Buying a home is a significant milestone, and for many Australian Defence Force members, purchasing a unit represents an excellent entry point into the property market. Units often require a smaller loan amount compared to houses, making them an attractive option for those looking to establish their first property investment or secure a home base during postings.
When applying for a home loan to purchase a unit, your financial situation will be thoroughly assessed by lenders. This includes reviewing your bank statements, employment history, and calculating your borrowing capacity. As an ADF member, you may have access to specialised Home Loan options that recognise the unique nature of military employment.
Loan to Value Ratio and Deposit Requirements
The loan to value ratio (LVR) plays a crucial role in your home loan application. Most lenders prefer an LVR of 80% or less, which means you'll need at least a 20% deposit. However, ADF members often have access to low deposit loan options that can help reduce this requirement.
If your LVR exceeds 80%, you'll typically need to pay lenders mortgage insurance (LMI). This additional cost protects the lender if you default on your loan. Fortunately, some lenders offer LMI waivers for ADF members, which can save thousands of dollars on your purchase.
Interest Rate Options and Repayment Structures
When purchasing a unit, you'll need to choose between a fixed interest rate home loan and variable home loan rates. Fixed interest rates provide certainty in your repayments, while variable interest rates may fluctuate with market conditions but often start lower than fixed rates.
Many lenders offer interest rate discounts to ADF members, recognising the stability of military employment. These discounts can significantly impact your home loan interest rate over the life of your loan. When calculating home loan repayments, consider:
• Monthly principal and interest payments
• Strata fees and body corporate charges
• Council rates and water charges
• Building insurance and contents insurance
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The Application Process for Unit Purchases
The application process for purchasing a unit follows similar steps to buying any property. However, lenders will pay particular attention to the building's structural integrity, strata management, and any upcoming major repairs or renovations that could affect the property's value.
Getting pre-approved for your home loan before you start property hunting can give you a clear understanding of your borrowing capacity and make you a more attractive buyer. Home Loan pre-approval also helps streamline the final application process once you've found your ideal unit.
During the application process, lenders will request various documents including recent bank statements, payslips, and proof of any existing assets or liabilities. ADF members should also provide documentation of their military employment, including details of any allowances or additional income.
Additional Costs and Considerations
When buying a unit, you'll encounter additional costs beyond the purchase price and loan establishment fees. Stamp duty varies by state and can represent a significant upfront cost, though some states offer concessions for first-time buyers or specific professions.
Strata fees are an ongoing cost unique to unit ownership. These fees cover building maintenance, insurance, and common area upkeep. Lenders will factor these fees into their assessment of your ability to service the loan.
Consider setting up an offset account as part of your home loan structure. This account can help reduce the interest charged on your loan by offsetting your savings against your outstanding loan balance.
Maximising Your Home Loan Benefits
As an ADF member, you have access to home loan options from banks and lenders across Australia, many of whom offer specialised products for military personnel. These may include reduced interest rates, waived fees, or more flexible lending criteria that account for military postings and deployments.
When comparing home loan rates, look beyond the headline interest rate. Consider the comparison rate, which includes additional fees and charges, to get a true picture of the loan's cost over time.
Building home equity through your unit purchase creates opportunities for future property investments or accessing funds for renovations or other major purchases.
Making Your Unit Purchase Decision
Purchasing a unit can be an excellent way to enter the property market or establish a solid investment foundation. The lower entry cost compared to houses, combined with the potential for capital growth and rental income, makes units particularly attractive for ADF members who may face regular relocations.
Before making your final decision, research the local property market conditions and consider factors such as proximity to transport, schools, and amenities. For ADF members, consider how the location will work if you're posted elsewhere and need to rent out the property.
Call one of our team or book an appointment at a time that works for you to discuss your unit purchase options and find the right home loan solution for your circumstances.
