First Home Buyer Tips
Buying your first home is one of life’s major milestones. It is the largest single purchase most people make throughout their entire lives. It can be a stressful and daunting process for many, but if you are dedicated and savvy, the Australian dream of home ownership can be your reality.
Saving Money
Usually, the largest upfront cost when buying a property is the deposit and saving enough capital can take a while. That’s why it is a good idea to establish saving habits as early as possible. Set up a direct debit to automatically transfer what your budget allows from each pay into a dedicated account with a high-interest rate. That way you're less likely to spend it and you can watch your savings grow.
Deposit
So, you’ve been saving for a while, but how much deposit are you going to need? The ideal deposit for first home buyers is generally at least 20% of the purchase price, with enough left over to cover the ongoing costs. The prospect of saving that much money can be intimidating, and some lenders do provide mortgages to buyers who have saved less. However if you do not have the 20% deposit, generally you will need to pay for lender's mortgage insurance, and perhaps a higher interest rate too, so the loan will cost you more in the long run.
Don’t over commit
Before you start house hunting, ensure you have pre-approval for the right type of loan from your Lending Specialist. This will give you an idea of what your spending limit is and you can inspect properties that are within your price range. It is important that you forecast your loan repayments so that you can factor in possible interest rate rises over time. At the outset of the loan, if you are only just able to make the repayments, with no buffer, you could put yourself in a predicament when rates rise. You are able to use loan repayment calculators or budget saving calculators such as these from Northern Inland Credit Union (Use link: https://www.nicu.com.au/banking/calculators). By factoring in your living costs, you can ensure you apply for a loan amount which will not result in your lifestyle being impacted. No-one wants to substitute holidays and eating out on special occasions with staying home and eating two minute noodles over a 30 year loan!
Interest Rates
A loan with a low start-up interest rate does not always guarantee that you’ll pay less money over the long term. Over the life of the loan there may be other costs which you need to factor in such as monthly account fees or annual fees. The low start-up rate may look enticing to begin with however once this rate expires, the ongoing rate may be much higher. You need to ask additional questions when meeting with the Lending Specialist.
It is possible to structure loans by taking an each-way bet on fixed and variable rates. This means you split up the loan between fixed interest rates and variable. It is also a good idea to speak to your Lending Specialist about your income and how regular your repayments should be, for example weekly, fortnightly or monthly.
Fine Print
Always read the fine print and do your due diligence when it comes to comparing loan rates, terms and conditions. Check your eligibility for the first home buyer grant and whether the ‘First Home Super Saver Scheme’ can help with the deposit. Some states and territories have stamp duty concessions for first home buyers, so enquire with your state's revenue office for details.
If you would like more information about buying your first home, download our First Home Buyers Guide and watch what our members, Tamara & Luke have to say about the process of buying their first home through Northern Inland.
To help make some of the first home buying terminology less confusing, check out our Home Loan Glossary.
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