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Looking to buy your first home? We reveal what first home buyers need to know before making a purchase.

Friday, 7 December, 2018

By David Brown, Senior Product Manager – Home Loans & Deposits

Whether you’ve been saving for years, or you’re just starting to think about it, buying your first home can be an exciting and daunting prospect. There is a lot to think about, which is why we’ve put together this helpful guide on what first time home buyers need to know.

Do your research

Buying a home for the first time calls for extensive research into factors such as location, local market prices, the type of home you want, and what is going to suit your lifestyle and budget. Start reading real estate articles and websites to understand what’s going on in the market. Doing your research can give you an insight into things such as: what areas are good to invest in for resale value; is there major building or infrastructure work planned for the area and what the local community is like.

During the research phase, you could view properties that are open for inspection to get a feel for the market and area. This could help prevent you falling in love with a property at first sight only to find out the location doesn’t suit you or that is out of your budget. 

Saving for your deposit

How much money do you need? How much can you borrow? What do you need to save?  What are the costs involved in buying a home? When you start thinking about buying a home there are a lot of questions to ask yourself. One of the first to answer is how much can you borrow, as this can help to refine what your budget is and how much you need to save. 

There are many factors accounted for when it comes to borrowing money that you might not have thought about, such as your existing debts, your income, your savings, and any regular outgoings you have. You’ll need to factor these in when looking at how much you can borrow. Use our home loan calculator to get an idea of how much you might be eligible to borrow and what your repayments could be.

Your deposit is usually between 5 – 10% of the property value, which is a good indicator of the minimum savings required. Once you’ve set a savings target, it is worthwhile setting a realistic timeline to meet your target, and create short-term savings goals to keep you on track. 

A good tip to help you save is to open up a separate savings account, not linked to your primary account, that you transfer money to. This can save you from the temptation of dipping into your savings.

Another option to help get you in your home sooner may be a Family Guarantee.  A Family Guarantee helps reduce the amount of deposit that you need to save for by using the equity in a family member’s house to secure a loan. Here’s a link to some more information on Family Guarantees, including some of the potential advantages and pitfalls.

Budgeting for extra costs

It’s also wise to think about the extra costs that you can incur when becoming a homeowner. As a first time buyer, it can be easy to overlook upfront costs such as Lenders Mortgage Insurance and solicitors fees. It’s also easy to think that once you’ve bought your house, you will only have to budget for your monthly home loan repayments. But there are additional costs to think about, such as homeowners insurance, council rates and maintenance and repair costs, to name a few. It’s sensible to have plenty of wiggle room in your budget for these extra outgoings. 

Grants

The government-backed first home owner grant (FHOG) was introduced to help first home buyers get into the market. It provides a one-off payment for those who are buying or building a home for the first time. Depending on which state you live in, the grants range from $7,000 to $26,000 and are usually paid at the time of settlement. This payment can help with buying costs such as Stamp Duty, Lenders Mortgage Insurance etc. The grants can be substantial, so it’s important to check if you are eligible.

Choosing your home loan

It’s important to choose the home loan that suits your needs, budget and lifestyle. While a fixed rate home loan can offer some people security, a variable rate home loan can offer flexibility and additional features.

For example, knowing what the loan repayments will be for a fixed period with a fixed rate loan can help some people feel more comfortable. Fixed rate home loans provide protection from any interest rate rises during the fixed rate period.

A variable rate home loan means your interest rate can fluctuate up and down depending on which way interest rates move.  This means if interest rates fall, you’ll benefit from lower monthly minimum repayments. If interest rates start to rise however, you will feel the effects of this and your repayments will increase.

There’s also the option to opt for a split home loan where you pay a fixed rate on one portion of the loan and variable rate on the other. This allows you to take advantage of the benefits of both home loans.

Making an offer

Once you’ve found the home you want, and have your finance in order it’s time to make an offer. The first step is to review the contract of sale with your solicitor to make sure everything is acceptable. If you’re happy, you need to put an offer in writing to the real estate agent or seller. It’s wise to get a solicitor or conveyancer to help you in this process. Then it’s a waiting game to see if your offer is accepted, or if you’ll have some negotiating to do with the vendor before you agree on a price.

Once your offer is accepted, you’ll have to sign and exchange contracts and put down your deposit. You’ll then have a settlement period that’s agreed to in your contract; at the end of this period you’ll then need to pay the remaining amount on the property using your home loan.

Buying a home for the first time comes with a lot of steps and things to consider but when the day finally comes around to pick up your keys and move in, it will all be worth it. 
Our friendly team is more than happy to guide you on every step of the way. Enquire today to begin your journey to becoming a first time home owner.  


This article is intended to provide general information of an educational nature only. It does not have regard to your objectives, financial situation or needs and must not be relied upon as financial product advice. Before you act on this information, you should consider whether it is appropriate for your circumstances. Applications subject to credit approval and fees and charges are payable. Terms and conditions apply and are available on request.

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