Buying your first home is very exciting, but it can also be very stressful unless you do your homework.
Here are some tips to help make your dream of owning your own home come true
KNOW YOUR BUDGET
First calculate your average monthly income, including your wage/salary and any extra income from part-time work or other investments.
Then deduct your average monthly outgoings. These include essentials like food, power and water usage, medical, car and home contents insurance, car or public transport expenses and phone bills.
Include non-essential items too, such as holidays, club memberships, restaurants, sporting events and entertainment – and consider whether they’re more important than building your long-term financial future.
Be sure to apportion any expenses that you pay quarterly or annually.
If you’re currently paying rent then leave it out – you won’t be paying it after you move into your home! However add council rates, fixed utility charges, and an allowance for maintenance and repairs that your landlord normally pays.
What’s left over is the maximum amount that you can spend on loan repayments, although it’s best to be conservative and allow for rising interest rates.
Also keep a ‘rainy day’ cash buffer so that you can keep making your loan repayments in the event of unexpected expenses.
Expect to pay 10–20 percent of the purchase price as a deposit. The higher the deposit the greater your equity in your property, and the smaller your loan repayments will be.
This varies depending on the type of property and the state where it’s located.
Here are links to information about stamp duty in Australian states and major territories:
Expect to pay on average approximately $1800 for a solicitor or conveyancer to act for you in the purchase of your property. This is to check the sale contract, conduct a property title search and correspond with the vendor’s solicitor/conveyancer.
Your solicitor/conveyancer can also arrange the building and pest inspections (see below). These are essential, especially for properties that aren’t new, and normally cost around $500-700 depending on the area and the type of property.
Defects noted in an inspection report don’t necessarily mean that the property isn’t worth buying; only that you need to take them into consideration. You can request that they’re rectified, negotiate a price reduction, or as a last resort withdraw from the purchase.
This is for your lender’s documentation preparation, legal fees and an independent property valuation, which financial institutions require before they approve finance for property purchases.
LENDER'S MORTGAGE INSURANCE (LMI)
Financial institutions regard a deposit of less than 20 percent of the negotiated price as a risk, and require you to take out LMI in case you default.
This insurance protects the bank, not you – although you pay for it!
This one-off grant was introduced on July 1, 2000 to compensate first home buyer’s for the cost of the Goods & Services Tax on home ownership.
Although it was introduced by the federal government it’s funded and administered by the individual states and territories, with qualifying criteria.
Check www.firsthome.gov.au to see if you qualify.