Buying your first home is a big step and a whole lot more complicated than buying a flat-pack bookcase. And just like many other big steps in life, and unlike a flat-pack bookcase, it doesn’t come with instructions – and everyone reaches the finish line in their own way. But it’s cool, we’re here to help. Read on as we go through the major milestones you’ll likely reach along the way to getting through your new front door.
Devoting yourself to a deposit
What’s the first thing to think about once you’ve decided to buy a house? How you’ll start saving. What’s the next thing to think about? How you’ll keep saving. That all-important deposit won’t grow by itself. So how and when do you know you’ve got enough? It depends on how much the home you want is and how much you can borrow. In percentage terms, 20 per cent is a good target for a deposit (though keep in mind you’ll probably need to consider some upfront costs, which we’ll talk about later), but it can be less if you take out lenders mortgage insurance (or LMI, for short) or go with a guarantor (someone who ‘guarantees’ they’ll pay back the loan if you can’t). It’s actually all about loan-to-value ratio (LVR), which is basically the amount you are borrowing written as a percentage of the property value. The bigger your deposit, the smaller your LVR (which means there’s lower risk for your lender). Generally, it’s good to have a 20 per cent deposit, or an LVR of 80 per cent, to avoid extra costs like LMI, but you can still make it work with less.
Finding out how much you can borrow (and repay)
It’s a question as old as time. Try out online tools like our borrowing power calculator and our home loan repayments calculator to find out a rough idea of what you’re in for. For example, the repayments calculator lets you put in and adjust your loan amount, loan period, loan type, interest rate, repayment type and frequency, and then it spits out your estimated monthly repayments. (Psst: if you want an extra hand understanding all the different loan types and lingo, check out our home loan comparison or call our home loan specialists on 1800 267 809.) Bonus tip: how much you can borrow may not equate with how much you should borrow. Make sure your repayments are realistic and consider any contingencies, like if your income is reduced, to give yourself a financial buffer.
Knowing what you want. What you really, really want
You’ve likely been doing this since the dream of owning your own home was just a twinkle in your eye, but it’s a good idea to make a list of all that you’re looking for in a first home, and break it in two: the must-haves and the (kinda optional, can-compromise) wants. Then search online for homes that fit your criteria – the right location, size and property type to create the lifestyle you’re dreaming of, for a start. Consider things like schools for the kids (if they’re a part of your plan) or access to public transport or bike paths. Then head along to openings and auctions and chat with the agent to gather as much information as you can. You’ll learn about things that might influence price, and as you watch different properties over time you might see prices rising or falling. You could even start to recognise when a home is particularly good value, so you’ll know exactly when to pounce.
Being honest about upfront costs
Deposit? Saved. Loan? Calculated. Apart from monthly repayments when your mortgage starts, that’s it for the money stuff, right? Nope. Even when you’re planning your deposit, you’ll need to factor in costs like stamp duty (a government tax you pay on any property purchase) and conveyancing fees for a conveyancer who’ll help with all the legal bits of transferring the property from the former owner to you. Plus there might be other costs and fees like council rates, legal transfer fees, a building inspection, repairs – even a removalist to move all of your things. You usually need to pay these costs upfront, so think about whether you’ll subtract them from your deposit target or save for them separately. And don’t forget to budget for home and contents insurance down the track to protect your new pad.
Going for a grant
Take a look to see if you can get your hands on the first home owner grant, a one-off payment for eligible first-home buyers who buy or build a residential property. Eligibility criteria differs across Australian states and territories, but if you can get it, it could take a nice little chunk out of your loan. Talk with your lender to find out more about it.
Getting pre-approval on the right loan for you
When the right home comes along, you don’t want anything getting in your way. One way to make sure you’re ready to kick into gear is to get home loan pre-approval from your bank. While it isn’t final approval, it does mean the lender has agreed in principle to lend you the money. And it can help you house-hunt with confidence because you’ll know you’ve got a particular price to stick to. It also shows real estate agents that you’re the real deal.
Training for auctions and private sales
You’ve been buzzing all over your favourite neighbourhoods looking at properties. You’ve made a list of must-haves and wants, set your budget and have pre-approval for a loan. You might have had a taste of auctions and private sales too, but are you prepared for the edge-of-your-seat tension and excitement of it all? Both have their pros and cons, so we’ve got a few tips to help you decide which type of sale you might prefer.
Number one: remind yourself to stick to your budget. When it comes to learning how to bid at auctions, get a taste of the process by standing on the sidelines and taking notes. Auctions tend to fire up people and prices, so prepare for extra stress (or excitement, if you’re into it). With a private sale, the stress is less, and the cost to the seller may be lower, so it could be a better value buy for you. Prepare yourself for some negotiation to find the price sweet spot. Most importantly, no matter what type of sale you go for, only make a decision that you’re comfortable with.
Settling on – and into – your new home (woohoo!)
Here’s the best bit. You’ve found your dream first home! Congratulations. Your offer has been accepted and you’ve applied for full loan approval from your lender. Before you move in, you’ll be getting into the nitty-gritty of settlement territory – expect a whole lot of document signing and other administrative things like conveyancing, valuation and a final inspection. But what’s at the end? Holding your new home’s keys in your hand. Pop that bubbly and toast your new lifestyle.
Looking for more tips and inspiration?
Read the stories of people who’ve saved to make their first-home dreams come true – and those who’ve stepped onto the property ladder a bit more unconventionally.
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