Buying your first home can be a daunting task. It will likely be one of the biggest decisions and commitments you will make. So, it is important that you do your homework before committing to a property and entering into a home loan. There are probably a whole series of questions running through your head like; what kind of property to by, where, how much can you afford, what type of home loan to choose, with what features, what does the home loan application process entail, and the list goes on.
In this article, we hope to provide a little clarity on this process and provide some insight for first home buyers in order to be better prepared when navigating the purchase of your first home.
Where and what should you buy?
These questions are really dictated to a large extend by preference and capacity.
- Think about where you would like to live i.e. inner city, suburbs, regional etc;
- What kind of lifestyle would you like to have? Do you prefer the quite country life, the bustling city life or would you like to be closer to the beach?
- If you buy in certain locations as a first home buyer, you may be eligible for certain incentives.
- Your preferred lifestyle may also influence the decision on the type of home you are looking for i.e. do you prefer a fully detached house, an apartment, a townhouse?
- Another question you may ask yourself is should you buy an established home (that is a home that has been lived in before) or should you buy a brand new home, or off-plan home (one that is yet to be built).
- If you buy a new home (that has never been lived in) or off-plan, you may also be eligible for certain incentives as a first home buyer.
- Think about the amenity and infrastructure that you would like to live near, i.e. schools, hospitals, shopping centres, public transport etc.
If you are having trouble selecting a property, you may benefit from engaging a good Buyer’s Advocate / Agent who will be able to give you professional property advice. If you don’t know any, reach out and we’ll put you in touch with one based on where you are looking to buy.
This is an important factor as it relates to how much you can afford to pay for your first home and therefore will ultimately determine where and what you buy. Things to consider:
- How much have you saved or can you save as a deposit?
- Will you be able to cover a 20% deposit (plus stamp duty where applicable)? If not, you should expect to pay Lenders Mortgage insurance (LMI).
- Do you know what your borrowing capacity is? If not, don’t worry, we do this for you.
- Understand the First Home Buyer incentives in your state, ask us, your conveyancer or the State Revenue Office for details.
Which type of home loan is best?
This question really depends on your own specific circumstances. Just because it works for a family member or friend, this doesn’t necessarily mean that it is going to be right for you. Everyone’s circumstances are unique and as such, we like to delve deep into your personal situation so that we can gain a better understanding of what will benefit you.
There are several home loan features to consider, and again this will largely depend on your situation. However, some of the more popular features that are considered are:
- Offset accounts – the funds in your offset account are applied against your home loan balance before interest is calculated, therefore reducing the amount of interest you pay on your home loan;
- Redraw – If your minimum monthly repayments are $2,400 per month and you pay $3,000 for a period of 12 months, you will have paid an extra $7,200. A redraw facility would allow you to access the extra $7,200 you have paid.
- Variable Rate – this is a fluctuating interest rate that is influenced by the Reserve Bank of Australia and lender movements;
- Fixed Rate – a fixed rate loan locks in a specific interest rate for a specific period of time (usually between 1-5 years, however there may be longer options);
- Split Loans – split loans allow you get the best of both worlds when it comes to interest rate, that is you may choose to split your home loan into multiple loan accounts some of which may be on a variable rate while others on a fixed rate.
There are many more features to consider and also pros and cons for all of the above features, so it is essential to discuss your home loan requirements with us prior to making a decision.
What does our home loan process entail?
We don’t cut corners when assessing your situation. As mentioned previously, we like to understand your situation thoroughly in order to provide you with a solution that enables you to achieve your home ownership goal. Here is a brief sequence of how we approach your home loan application:
- Gain an understanding of your goals and circumstances in our initial fact-finding meeting;
- We then collect the required documents to support your application;
- Once we have received your documents, we can then commence with the analysis of your financial information to determine your approximate borrowing capacity;
- All of the above steps then hold us in good stead to be able to match your requirements with an appropriate shortlist of lenders and home loan options;
- We then share this lender comparison and proposal with you and if you are happy with the proposed solutions, we apply to the agreed upon lender on your behalf;
- The lender then assesses your application and provide us with their decision;
- Once approved, we, the lender and your conveyancer arrange for settlement;
- Once settlement is completed, you get the keys to your new home and you move in!
Obviously, the above is a highly summarised and condensed list of considerations to help you with this (sometimes overwhelming) task. There are several more questions, features and considerations you should make when buying your first home, but we hope that this article will at the very least provide you with some insight into some of the questions you should be asking yourself and the professionals you engage to assist you with this process.
If you are starting to look for you first home, the key is early engagement. So, contact us now so that we can help you from the beginning. We will try our best to relieve you of as much of the heavy lifting as possible. You will also have the benefit of leveraging off our extensive network of professionals and resources.
Disclaimer: The information provided herein is for general information purposes only and does not constitute specific advice. It should not be relied upon for the purposes of entering into any legal or financial commitments. Specific advice should be obtained from a suitably qualified professional before adopting any investment/financial strategy.