Financing a home purchase in Australia can get you into that starter home sooner than you realise ... photo by CC user Koala:Bear on Flickr

Thinking of getting into the Australian real estate market? It may not be easy to get into, but the rewards for owning property in one of the world’s most sought after countries by skilled and wealthy immigrants can be enormous for those willing to stick with it through the hard times.

What are your options for financing a home purchase in Australia? Below, we list four options that have worked well for first-time home buyers in recent times…

1) Fixed rate home loans

If you are convinced that interest rates are bound to go up over the term you are financing your home loan for, then getting a fixed rate home loan will likely be your best choice.

By locking in a rate that is sitting at historic lows as they have been for several years, you’ll get to pay down your mortgage with fewer of your dollars going to service the interest on your debt, even as rates climb higher at yet untold dates in the future.

2) Variable rate home loans

Want to take advantage of interest rates that sink lower than the one you start at from the beginning of your loan? If so, a variable rate loan will prove to be a wise choice.

For example, variable rate home loans from Newcastle Permanent might be a good option for you and your family if you think rates will stay the same or fall over the long term.

In this way, you’ll avoid getting locked into paying a higher rate while all your friends get to pay less year over year for their mortgages.

3) Honeymoon loans

Finding it hard to get your foot in the door of a hot real estate market? If you are a first time home buyer, it is very likely you find yourself in this predicament, as even the cheapest property seems out of your reach, no matter how hard you work.

Fortunately, many lenders offer products known as honeymoon loans. These mortgages offer discounted interest rates for the first year or longer to help you make some serious headway on paying down the principle on a starter bungalow or a cute condo in the city centre.

As the title suggests, the rate reverts to a higher one after the honeymoon period, but with the progress you can make in that introductory window, it can get you in the property game when you thought you were locked out.

4) Construction loans

Building your dream home from the ground up? If this is your situation, it can be financially crippling to borrow the whole amount of your anticipated loan while you are still pouring foundations and putting up load bearing walls.

A construction loan only lends you the amount of money you need at any given stage of the building process, starting from the land purchase, and progressing through the installation of the pad, the raising of the roof, lock up, and finally, for the house in its completed state.

In this way, you can fund the creation of your domain without having to subsist off ramen, water, and plain white bread.

If you own other property, one possible alternative to a construction loan that functions in a similar manner is a home equity line of credit. A home equity line of credit would allow you to take out money as you need it in the construction process, and this money would be loaned against the equity in the properties you already own.