Buying your first home: What you need to know

Buying your first home is a very exciting experience.

You are taking a significant step in life and entering the exciting world of homeownership.

Though, before you jump at the latest property market opportunity, make sure you know what to expect when buying your first home.

Manage and reduce your debts

Thinking about purchasing a new home or land is incredibly exciting but when it comes to the reality of borrowing, large amounts of debt may hinder your ability.

Make a list of all of your debts like your credit cards, car loans, shared debts and layby accounts like AfterPay that may have a negative impact on your capacity to borrow.

Then, over time, make an effort to pay off and manage your debts before you look at applying for a home loan.

Find out if you qualify for a home loan

Before you get too excited about that new home you’ve found online, make sure you are financially secure enough to apply for a home loan.

There are plenty of free online home loan eligibility calculators available to help you gauge whether buying a home right now is realistic.

One of the most important tips for buying your first home is to compare as many home loans as possible, so that you are confident you’ve found a good deal.

Find out which government grants are available to you 

Across Australia, the First Home Owner Grant (FHOG) was introduced in 2000 to support young people trying to enter the property market. 

The national scheme is funded by each of the states and territories and is administered to eligible home buyers under their respective legislation.

Queensland 

In Queensland, you may be eligible for the $15,000 First Home Owner Grant (QLD) to put towards your new home (valued at less than $750,000).

New South Wales

In NSW, you may qualify for the $10,000 First Home Owner Grant (NSW) as well as assistance with stamp duty with the First Home Buyer Assistance Scheme (FHBAS).

Australian Capital Territory (ACT)

As of 1 July 2019, home buyers in the ACT may be eligible for Home Buyer Concessions which will mean you won’t be required to pay stamp duty on your new home.

To claim the concession, you can’t have owned a property in the last two years.

Find out whether you qualify for the home buyer concession according to the eligibility requirements.

Victoria

You may be eligible to receive up to $20,000 with the First Home Owners Grant (VIC) when the home you are purchasing is less than $750,000.

You may also be eligible for the First Home Buyer duty exemption or concession depending on whether you meet the eligibility requirements.

Tasmania

In Tasmania, you may be eligible for a First Home Owner Grant (TAS) of $20,000 until 30 June 2022, if you are building or purchasing a new residence.

South Australia

New home buyers in South Australia may be eligible for the First Home Owner Grant (SA) of up to $15,000, provided they meet the current criteria.

Western Australia

In WA, new home buyers or new home builders may be eligible for a one-off payment of $10,000 under the First Home Owner Grant (WA).

Northern Territory

In the Northern Territory, you may qualify for the $10,000 First Home Owner Grant (NT), provided you are buying or building a new home.

You may also be eligible for the BuildBonus grant or the Territory Home Owner Discount, if you are looking to purchase an established home.

Australia wide

Across the entire nation, eligible people may be entitled to claim the Australian Government’s HomeBuilder Grant.

Whether you are looking to build a new home, buy a new home or substantially renovate a home, find out whether you are eligible for the HomeBuilder Grant.

Beware of Lenders Mortgage Insurance (LMI)

When you purchase a home, you are permitted to put down a deposit of less than 20% of the total property value.

However, if you do, you may be required to pay Lenders Mortgage Insurance.

The purpose of Lenders Mortgage Insurance (LMI) is to protect the lender if the borrower defaults.

There are a few factors that can affect the cost of your LMI including:

• The size of your home loan
• How much of the deposit you are able to pay
• Whether the property is an investment property
• Whether you are a full-time employee
• The insurer used by the bank you are borrowing from

Essentially, the more money you borrow, the higher of a risk you are to the lender.

Therefore, it’s always best to save as much as possible and aim to pay the full 20% deposit rather than succumb to paying lenders mortgage insurance.

Make sure you perform building and pest inspections

To add another level of security to your new purchase, it is always best to pay for a building and pest inspection, before you commit to buying your first home.

A building inspection will assure you that the home you are purchasing is free from building malfunctions that are more common than you might think.

Faulty electrical outlets, drain lines, poorly fitted windows, rushed paint jobs and improperly installed insulation can have a huge effect on the value of your investment.

A pest inspection will evidently ensure your new home has not become a home for rodents and cockroaches between completion of the build and finalising the purchase.

Consult the help of an experienced financial planner to help you buy your first home

Buying your first home is one of the biggest purchases you will make in your lifetime.

That’s why it’s always important to have a trusted and experienced financial planner on your side to help you make the most informed decisions and get you the best deal possible.

If you’re interested in applying for a home loan, speak to our Mortgage Broker, Wayne Milner.