Part A: Financing a first home Suppose that you are an Australian first-home buyer and intend to purchase either an established or a new residential property (e.g., house, apartment, townhouse, villa) in Sydney, at a market value of AUD 1,100,000. You have saved a deposit (which can be any amount between 5% and 20% of the purchase price) and you are now looking for the best financing option for your acquisition. The loan amount can be borrowed from any Australian financial institution that provides home loan services. Assume that the loan term is also 30 years at all banks. Imagine that you are married with two kids under nine years old. Your combined salary is AUD 200,000 (before tax). Your cost of living is in the average range for a family of four in Sydney. Imagine that you have a car loan with an annual repayment of AUD 7,000. You have no other debt. Answer the following questions based on the above-mentioned information:

In answering to the below questions, may you also provide reference to your response?

1. Choose TWO financial institutions in Australia for this purpose. What types of home loans do the selected financial institutions have for First Home Buyer borrowers? Explain the details of all of their options (e.g., fixed interest rate, variable interest rate, offset account, package fee, redraws, additional payment, split loan) for the first-home buyers. Briefly explain what the risks (costs) and benefits of these options are for you in the short run and long run.

2. Based on your comparison of two selected financial institutions, which financial institution would you borrow from and why? Provide your calculations for each home loan and show the details on the payable total interest (for 30 years), annual interest (for each year over the next 30 year), and the monthly payment. Please attach the calculations at the end of your assignment. It is not included in the word count.

3. What other costs need to be considered when you buy your first home in NSW? Explain them briefly. Are you eligible for any first-home buyer government subsidies and grants? If yes/no, briefly explain why.

4. When you borrow from a financial institution what happens to its financial position (accounting point of view) and how does such property finance contribute to the overall economy? Briefly explain.