First Homeowner’s Guide
First Homeowner’s Guide
What you need to know now about buying your first home
Buying your first home can seem a long time away, but with the right know how you might have the keys much sooner than you first thought. Try these tips that will set you on the right path to turning your dreams into reality.
- Set yourself a budget
You need to understand your numbers….that is, what comes in vs what goes out. Reviewing your bank account and credit card statements over the last few months is a good starting point. Write your numbers down, subtracting your money out from your money in. This will give you an idea of what you could afford by way of monthly loan repayments.
What you may discover is that a large portion of your expenses are what we would call discretionary or lifestyle expenses such as holidays, automobiles, alcohol and tobacco, restaurants and other entertainment. Reducing some or all of these expenses could improve your borrowing ability significantly. Why not kick a bad habit and at the same time get your foot in the property market?
Ensure you have paid off most of your existing debts such as credit cards or personal loans. This can increase your borrowing capacity and strengthen your credit rating helping to secure a lower interest. Taking this point a little further, reducing your credit card limit can also do wonders for your borrowing capacity.
- Save for a deposit
Start saving now if you haven’t already. The more money you have for a deposit, the more room you have to negotiate with your lender and secure a lower interest rate. If you can manage to build a 20% deposit you can avoid paying lenders mortgage insurance, however some lenders will accept as little as 5%.
- Understand the costs
There are a number of costs associated with buying a property. Unfortunately, they will lower your initial projected borrowing power.
Stamp duty: This state tax will likely be your biggest expense aside from the actual property price. The good news is that as a first home buyer, you could be exempt from stamp duty or similarly entitled to a rebate or concession. Every state has different policies so be sure to check them out.
Building and pest inspection: If you’re looking at buying an existing property, you want to make sure there’s no unseen structural damage and pests. This may seem like an avoidable expense, but these inspections could save you thousands down the track. Be sure that these are done before any contracts are signed.
GST for new dwellings: Some states have laws around GST for new buildings and require you to pay tax on valuation and inspection. Be sure to see if this is a cost for you.
Legal fees: Whether it’s a transfer of title, contract reviews or a property and title search, there will be legal fees involved. Ask your solicitor for a quote before you get into signing any documents to avoid any nasty surprises down the track.
Lenders Mortgage Insurance: If you are financing your home with less than a 20% deposit, banks add Lenders Mortgage Insurance to mitigate their risk.
Land title fees: The Land Title Office will charge a registration fee whenever you submit any documentation related to your dwelling.
- See if you are eligible for a grant
There are a number of one-off financial grants and other grants available for first home buyers. However, these vary from state to state.
- Look at your credit report
Having a poor credit rating could affect your ability to get approval on a loan. Subject to eligibility criteria, you could be able to access a free copy of your credit report by visiting www.equifax.com.au . If you have a poor credit rating, it’s not all over. There are agents and businesses that can assist with credit repair.
- Speak to a mortgage broker
There are a number of benefits to speaking to a mortgage broker. Whilst experience and education differ between brokers, generally, the benefits of speaking with a professional include:
- Helping you to understand your own unique situation and options better
- Provide you with tips and tricks to achieving your property goals
- Finding the right loan for you, potentially saving you thousands in interest
- Utilising their experience and processes to remove pain points and speed up the process
- Access to a range of professionals including solicitors, valuers and real estate agents and can recommend them to you
- A trusted professional who’s in your corner for life, when things change in the market, economy, or in your own life.
- They will be with you every step of the way
Ready to take the next step towards securing your first home? Book a free consultation now.
