5 Things All First Home Buyers Wish They Knew
Buying your first home may be one of the most important steps you’ll take to building your personal wealth and securing your financial future. Here are five things first home buyers wish they knew before taking the leap.
People often say that buying your first home should come with a manual. The move from renting to owning a home is one of the biggest steps young Australians will make. But the excitement of scrolling online can quickly become daunting, confusing and challenging at best. Here are five important things first home buyers wish they knew on their road to success.
Keep Within Your Comfort Zone
Before you begin looking at properties you should get a pre-approval from your preferred lender or engage a mortgage broker to do this on your behalf. This will help you gauge the right type of properties within your budget and enable you to act quickly once you’ve found the right one. Most pre-approvals only last 90 days so it is important to renew it every three months with your lender or broker.
You Don’t Always Need a 20% Deposit
First-home buyers generally assume they’ll need a 20 per cent deposit before applying for a home loan, but that’s not necessarily the case. Some lenders will allow you to buy a home with a much smaller deposit, tapping into features such as lenders mortgage insurance (LMI) or family guarantees. There are also a number of state government initiatives to assist first home buyers entering the market.
Taylor (26 years old) recently purchased an apartment in St Kilda East in Melbourne with her boyfriend for just over $500,000. As it was an older property, she didn’t qualify for Victoria’s First Home Owner Grant, however after some research she realised she was able to claim a one-off first home buyer duty exemption. “I was surprised at how many government initiatives are available to first home buyers, and how easy these are to access,” said Taylor. “It’s important to do all your research as you may qualify for a grant that can significantly help you straight up and allow you to make a purchase sooner than expected.”
Get Clued in on Auction Rules
Going to auction can feel like a game. It is worthwhile attending a few auctions first as a spectator prior to the one you want to participate in. This will help you to feel confident and prepared come game day.
When you bid at auction, you’re accepting the full terms of the contact, and will not be able to negotiate terms, such as cooling off period or a longer settlement. Set a bidding limit before you go (and bring moral support if you need) as it’s easy to get swept up in the momentum once the auction is underway.
The Big Picture
It’s difficult not to let your emotions get the better of you when looking at new homes. After all, this is somewhere you want to build a life, either now or in the future. Write a list of pros and cons, and the essentials you simply can’t live without. This will help you to be pragmatic and look beyond the aesthetics of the property.
Samantha (27 years old) purchased a two-bedroom apartment in Randwick, Sydney, with her fiancé. She is a full-time nurse, so her priority was finding an apartment that was walking distance to the hospital. “At first, I really wanted a modern apartment, but we were priced out of the market,” said Samantha. “We found a run-down 1970s apartment, it was big and close to everything we needed, and most importantly, within our price range. I’m so glad I looked beyond the aesthetics. We had money left over to renovate so that now it ticks many boxes. We have also added significant value that we can leverage down the track.”
There Are Associated Costs When Buying a Property
There are many costs to consider when purchasing a home. It’s not as simple as a $200,000 deposit and $800,000 home loan that equates to a million-dollar property. There is stamp duty, solicitor’s fees, inspection reports and lenders mortgage insurance, which may be required if your deposit is less than 20 per cent. Then, there are also the associated costs once you’ve moved into your new home, such as council rates, strata fees, maintenance and repairs and bank fees. It’s important to consider the real cost of ownership in your initial budget.
Gina (31 years old) recently bought a three-bedroom apartment in Sydney’s eastern suburbs with her husband and stresses the importance of doing your due diligence before buying.
“While it can be costly to purchase strata reports, particularly when you’re interested in multiple apartments, it is very important to understand the current levies and any pending works,” she says. “It is worth getting access to the last few years of AGM minutes and financial details of the sinking fund. Remember you’re not just buying an apartment; you’re buying into a building and are taking on all the costs associated with damages, repair and maintenance.”
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