A Home Loan Guide For First Home Buyers
POSTED BY Adam Jordan ON 29 Jun 2018
Owning your own home is a goal or dream for most Australians these days, but we all had to start somewhere, but exactly where? No matter your stage of life, if you’ve decided it’s time to take the plunge into homeownership and the responsibility of a mortgage rather than paying rent, there are things you need to know. Here’s some advice that might help you along the way to owning your first home, especially if you are a first-home buyer
SAVING UP FOR A DEPOSIT
Not many of us would have $500,000 or more in our bank accounts to pay cash for a first home, so the first step is to have a deposit of around 20 percent of the price of your chosen property. Add more for extra fees and charges such as stamp duty (unless the government is waiving it at the time you buy. More on that later). Of course, your bank might still approve a loan if you have less than the 20 percent but you’ll be paying a lot more in the long term, including mortgage insurance for your bank in case you can’t pay your mortgage down the track, which doesn’t protect you, just the bank. There’s also the chance you’ll be slugged with a higher interest rate, so the higher your deposit the better. Also, for a good deal, shop around.
A good, ethical mortgage broker can be useful and will help you find a loan that suits you, but shop around for a broker who understands your particular needs. If you do decide to opt for a mortgage broker make certain you document everything and keep a record of your dealings with the person you choose and ensure you understand the costs involved. Also, don’t be tempted to borrow more than you need, never allow the broker to fill in the forms ‘later’ and never sign an incomplete form that you have not read over carefully and accepted as accurate.
Having a mortgage is a long-term commitment, sometimes up to 25 years so it’s not a good idea to misrepresent, ignore or make mistakes when checking what it costs you to keep up your lifestyle. This means you might need to have some savings set aside for unforeseen life events. You’ll need to consider other ongoing and rising costs including home and contents insurance, council and water rates, gas and electricity, plus NBN and mobile phone costs, maintenance or future renovations. And remember, even if your bank offers you $700,000 it doesn’t necessarily mean you can afford to repay it.
Your lender will usually give you pre-approval so you’ll have a ballpark figure to work with and when you’ve found the home you want, you need to call the bank or non-bank lender and make a ‘condition of finance’ offer but if you go to an auction and make a bid you should have fully approved finance in place.
SEARCHING FOR A HOME
Be prepared for some challenges because house hunting can be tiring especially for first home buyers new to the process. Some hot tips:
● Do your own research
● Know where you want to buy
● Know how much you can pay
● Get in touch with our local agents
Before you bid at an auction go to a few and watch how they work. The main thing is to first go over the contract (get it from the agent before the auction) with a fine-tooth comb before you bid. If you can, have it checked by a conveyancer or solicitor, and also get an expert to check the place over for any structural faults etc. Remember, it’s too easy to get carried away at auctions and also, your loan should be pre-approved before you bid. Check with the agent beforehand to find out how much you would need as a deposit if you win a bid.
A PRIVATE SALE
Private sales allow you more time to think about the home on which you are considering making an offer and buyers can make formal offers in writing which can include ‘subject to a building and pest inspection, or ‘subject to finance approval’. Also, buyers are allowed a cooling off period, but the downside is it can often be a waiting game until you know your offer has been accepted. Auctions are cut and dried and you can see the competition.
GRANTS AND STAMP DUTY
Buying property means you have to pay stamp duty tax to the state government based on the value of the property. If you look online you’ll find stamp duty calculators to estimate what you will be paying. However, for first home buyers, many Australian states acknowledge how hard it is for these buyers to break into the market so they have concessions and some even waive the stamp duty altogether under a set price.
After you’ve bought your home your conveyancer or solicitor will negotiate a date to settle, (unless a time has been set as part of the conditions of sale) which means the day the keys will be handed over to you and you have to pay the total price of the property. Settlement periods are usually from four weeks to 90 days.
Alex Morrison has worked with a number of banks and real estate agents for over 10 years. In this time he has worked with a range of businesses giving him an in-depth understanding of many different industries including home decoration, improvement and renovation and sales.