Top ten tips for first home buyers
It is a long journey from saving up the first deposit to actually owning your own home, but it is certainly a rewarding one! Your first property is an important financial and emotional investment into your future, so you want to make the most of every opportunity to make your dream home a reality.
1. Start budgeting like a home owner
The journey starts with saving for your deposit. This takes a great deal of discipline, especially in the beginning when the dream of owning a home seems so far away. Once you own your home, you won’t have so much disposable income, so start limiting your disposable income now, and put this money aside to build your deposit. And when you establish a realistic and practical budget, you will have a better idea of what you can afford once you take on a mortgage.
2. Save the biggest deposit possible
The larger your deposit, the more equity you will have in your property right from the beginning. This also means you are paying less interest. Place your growing savings into a fixed term deposit or a high interest savings account so you can grow your deposit through accumulated interest.
A larger deposit will also have the bonus of making lenders look more favourably on your loan application. When they see that you are disciplined and committed to owning a home, they will know you are a good risk.
3. Can your parents go guarantor?
Did you know its possible to borrow up to 98% of a property price in some circumstances?
if your parents have equity in their home, they can go as a guarantor on your home loan which minimises your deposit amount. They don't actually need to put any money into the purchase it only uses a portion of their property as security.
4. Minimize your debt
Accumulating debt through credit cards can undermine all your efforts to save up for a deposit. When you are ready to apply for a home loan, the lender will be examining your credit history, so if you do have ongoing debt, stay on schedule with payments so your credit rating is not adversely affected. Cut down on the credit card use, and pay off your car and any personal loans so you can concentrate on saving for your first deposit.
5. Remember to calculate the costs of purchase
Once you feel you have saved a sufficient deposit to buy the property you want, don’t forget to double check your figures to make sure you can also afford all the related purchasing costs. Many first home buyers disregard or under-estimate expenses such as inspection reports, stamp duty, Lenders Mortgage Insurance (LMI) and legal costs. When you fail to account for these expenses, you run the risk of reducing your deposit when you are ready to buy.
6. Stay within your means (find out how much you can borrow)
House hunting can be an extremely emotive business and it is easy to get carried away about a dream property and forget that you can’t actually afford it. Find out how much you can borrow that way you know what market you can go shopping in. You need to maintain strict self-discipline so you don’t become tempted to purchase a property that is priced beyond your means.
7. Apply for the First Home Owners Grant early
The First Home Owners Grant is a government initiative designed to assist Australians in purchasing their first home. This grant can save you thousands in fees and duties. The conditions and benefits vary from state to state so visit the First Home Owner Grant website to learn how this can help you.
8. Research incentives and concessions
Each Australian state and territory also offer their own incentives and grants to first home buyers, including stamp duty concessions. So it pays to do your research on what financial assistance you are eligible to receive where you live.
9. Choose a property that suits your needs
Stay objective when you are looking at houses, and write up a list covering all the essential requirements of your ideal property. The list will generally centre on property size, location and price, although you may have other key requirements that need to be included on the list. You can also include a list of “wants” but these should be negotiable.
10. Automate your banking
If you separate and automate your budget it can help 'hide' money from yourself and make budgeting easier if you let your banking app do the saving for you. Work out your expenses and what you'd like to be saving. Your left over figure should be your guilt free spending limit.
If you have any questions or are interested in purchasing your first property, speak to Anthony and book in a 15 minutes chat to see how you can structure your first home.