With lower interest rates and the saga of the housing crisis easing, first homebuyers now hold a good spot in the buyers’ market. According to the Australian Bureau of Statistics (ABS), first homebuyers accounted for 29% of home loans in May this year. This is the highest that number has been since 2012, and it is looking like it will continue to rise.
APRA has relaxed the rules they had on lending to first time buyers and in NSW and Victoria, and governments have introduced stamp duty exemptions, making it easier to get into the market.
Whether you are looking to purchase your first home, or have family members who are looking to enter the market it is vital to avoid costly mistakes that can affect ability to buy. Here are some ground rules:
- Know your budget.
There is nothing worse than falling in love with a dream home, only to realise that it’s well out of budget. A good tip is to use a home loan borrowing capacity calculator or speak with a mortgage broker first about how much you can borrow, then start the hunting process.
- Lenders Mortgage Insurance.
This is can end up costing you thousands of dollars on top of your loan if you do not have a 20% deposit. This insurance is designed to protect the lender, as a smaller deposit is often seen as a higher risk loan. Speak to your mortgage broker about the First Home Loan Deposit Scheme, or in some cases, you may be able to use a guarantor.
- Rate reality.
What goes down, in rate world must eventually go back up. While rates are low now, it is important not to borrow above your means – because when they go back up you risk not being able to continue to make your repayments. Buyers and families should compare what home loan options are out there – and use a website site such as Morningstar to make sure you are getting the best deal.
- Additional fees and costs.
It’s one thing to buy a property, but you also need to take into consideration other costs associated such as stamp duty, building inspections, strata, solicitor fees, moving costs, furniture or renovations. Setting a buying budget will really help ensure that you have enough left in your loan, or that you have saved enough to be able to cover these costs.
Many first home buyers are looking to keep costs as low as possible, but this could be a major problem when it comes to cutting out building or pest inspections, particularly in older properties. It could in fact end up costing much more than ever anticipated, just look at the crisis in the Opal Towers recently. It is vital to get an independent building report and pest inspection done on any property you are serious about buying.
- Missing benefits.
The First Home Owners Grant differs in each state, and your personal circumstances affect what you get. There are other important rules you need to be aware of, particularly if you own a business and it is crucial to discuss these with an adviser or your accountant to make sure you don’t miss out.
- Power of negotiating.
Not everyone is comfortable at haggling, but your home loan rate and the price of the property should be negotiated. If this is not something you are conformable with, it is a good idea to take a family member along to the Real Estate Agent, who may have more experience or to discuss this with a mortgage adviser who has a vested interest in getting you the best rate on the market.
Buying property is an exciting step for the buyers and their families, and its important to get the details right. CAAA Commercial Concierge can offer your family peace of mind with a dedicated home loan adviser to help navigate the process with you.