Top Tips for First Homebuyers

Top Tips for First Homebuyers

Buying your first home is an exciting time and the high you feel is indescribable. But it’s also a big responsibility – one that requires research, planning and organization. For most people, it’s the biggest purchase they’ll ever make, so it’s important to take your time and ensure you’re going into this commitment with eyes wide open. Below are some handy pointers to keep in mind so that when you do sign the dotted line, you can do it with no regrets!

Know the upfront costs:

Most homeowners are buying their homes with the help of a mortgage. They will take out a loan, with the lender asking for a minimum 10% to 20% deposit.

If your deposit is less than 20%, you are usually subject to the Lender’s Mortgage Insurance (LMI), a payment to your lender that covers them in the case that you cannot pay back your loan. (That does not necessarily mean you have put down 20%. More on how to get help with this later.)

Government charges are another factor to keep in mind—they include stamp duty and things like mortgage and registration fees.

You will also need to cover the legal and conveyancing costs for the solicitor/conveyancer that handles the settlement process.

Additional costs may include building/pest inspection fees and the expenses for hiring professional moving services.

See what financial assistance is available:

Because buying your first home is financially intimidating, we want to give you a few resources to make it as painless as possible.

First Home Loan Deposit Scheme

The First Home Loan Deposit Scheme can cover the cost of your Lender’s Mortgage Insurance even if your deposit is as small as 5%. Not all lenders offer it and places are limited, but it’s worth enquiring about.

For detailed info, visit the link:

https://www.nhfic.gov.au/what-we-do/support-to-buy-a-home/first-home-loan-deposit-scheme/

New Home Guarantee

Another way to cover your Lender’s Mortgage Insurance is through the New Home Guarantee. An Australian government initiative, it essentially removes the need for LMI if you’re building or purchasing a newly-constructed property. Eligible properties include newly-constructed dwellings, off-the-plan dwellings, house and land packages, and land plus a separate contract to build a new home.

For detailed info, visit the link:

https://www.nhfic.gov.au/what-we-do/support-to-buy-a-home/new-home-guarantee/

First Home Super Saver Scheme

If you’re over 18 and have not owned Australian property before, under the First Home Super Saver Scheme you can withdraw voluntary super contributions you’ve made since 1 July 2017 to put towards a home deposit.

Currently you can withdraw a maximum of $15,000 each year, up to a total $30,000 across all years.

From 1 July 2022, this maximum total amount will increase from $30,000 to $50,000. However, the max amount withdrawable each year will remain at $15,000.

For detailed info, visit the link:

https://www.ato.gov.au/individuals/super/withdrawing-and-using-your-super/first-home-super-saver-scheme/

Understand the ongoing costs:

After the whole settlement process is done and dusted, the next thing to be mindful about are the ongoing costs of your new home.

Loan repayments: These are usually a monthly/fortnightly payment and will often cover the principal amount borrowed, plus interest.

Interest charges: You can opt for a fixed interest rate, a variable interest rate, or both. A fixed-rate home loan has a defined, unchanging interest rate for a set period (generally 1 to 5 years). On the other hand, a variable-rate home loan may see the rate you pay over the life of your loan change. Banks will vary it based on various factors such as the RBA cash rate and other market conditions.

Additional tips when considering your first home:

Reconsider location and/or size

It’s worth thinking about suburbs that are a bit further out. While it may not be the best choice for everyone, nowadays more people are working from home and don’t need to be right in the centre of the action. Prices are generally lower too, so you can usually get a better house for the same price.

If you don’t want to compensate on location, or are on a tighter budget, units and apartments are also great alternatives to consider. Unit prices have not risen as fast as free-standing homes, and nowadays many people are choosing to raise young families in units and apartments. There are many affordable ground level apartments that offer that house-like feel, plus you can take advantage of all the communal amenities! People also tend to think bigger is better when it comes to homes, but once they realise how much work it takes to upkeep, they realise that a smaller, low-maintenance home is what they really needed.