Purchasing property for the first time can all be very confusing! First home buyers usually have a lot of questions so let’s look at a few basic questions and answers regarding property, first home buyers, lenders, deposit and all that other tricky stuff!

Where do I start on my First Home purchase journey?

Check out my post on the First Home Buyer’s checklist!! Start researching the areas that interest you, the type of dwelling you’re looking for, the amount of money you’re looking to borrow. Just get stuck in and do a lot of research!! The internet is a great place to start!!

now this is my idea of a first home! friends over by the pool on a summers day!!

How much deposit do I need to purchase my first home?

It varies and is really up to you! Lenders will consider lending you 100% of the purchase price if you do not have a sufficient deposit and have adequate capacity (income) to service the debt! The larger your deposit the lower your repayments will be and the larger the equity in your home will be, and if you have 20% deposit you can avoid paying Lenders Mortgage Insurance!!

What is Lenders Mortgage Insurance (LMI)

If your ‘Loan to Value Ratio (LVR)’ is above 80% then it is mandatory to pay LMI. It is a fee to protect the Lender incase you default on your home loan. The higher the LVR, the larger the LMI fee will be!

What’s an easy way I can increase my borrowing capacity?

The best way besides earning more income (lol if only it were that easy!) is to reduce your personal debt such as a reduction in your credit card limit.

How many types of Home Loans are there and which one is best for me?

There are tons!! And it’s important to find the best one for you! If you can’t afford too many rate rises then it may pay to fix your loan. If you want to pay off your loan quickly and make extra payments then you may want a variable rate with additional features such as offset.

How much is the First Home Owner Grant?

$7000 and in NSW you are exempt from Stamp Duty for purchases up to $500,000 and a reduction in stamp Duty for purchase over $500,000. Check out my post on First Home Owners Grant (FHOG)

Are there any ways my parents can help me out?

Yes! Many lenders have products where your parents can assist by using equity in their home. Products such as Family Pledge (St George) and Fast Track (Rams) can help with First Home Buyers.

What is a Non-Bank Lender?

Non Bank Lenders such as Rams and Wizard provide alternatives to the main stream Banks such as Westpac and CBA etc.. and have been very important in increasing competition in the Mortgage Industry the last 10 years. Without Non-Bank lenders we would have much less choice and even much higher fees due to lack of competition in the marketplace. Non Bank lenders have really struggled the last 6 months due to the Global Credit Crisis as they need to borrow money to lend you money and the cost of this has dramatically increased, thus seeing the closure and/or re-structure of many of these lenders. For example, Rams is now funded by Westpac. Non Bank lenders offer the same products as the Big Banks and are very competitive with rates.

What is a non-conforming lender?

If you have bad credit or poor repayment history, or have just arrived in the country or have issues elsewhere etc. then a non-conforming lender will often look ‘outside the box’ and consider your application! Basically if your application won’t be approved anywhere else, then we may try a non-conforming lender often as a ‘last resort’.

What should I be aware of when taking out a Mortgage?

Purchasing property for most of us is a huge decision so find a broker you can trust and always watch out for loans that seem too good to be true!!

What should I ask you as my Mortgage Broker?

Ask if i’m member of the MFAA! Ask about loan types, rates, comparison rates, features, fees, any additional costs involved, the process…ask anything and i’ll do my best to support you from application to settlement!

Are you currently thinking about entering the property market?? Well, buying your first property is definitely the most difficult!! The other day on the news I heard that average house prices in Sydney are amongst the most expensive in the world!! So how on earth are we supposed to purchase our first property when prices are so high? It seems so daunting that we probably have to save, save, save for years only come up with a deposit, and only then be able to afford a small shoe-box of an apartment!! Luckily, the Government has a subsidy called the ‘First Home Owners Grant’ (FHOG) to help us out!!

the FHOG is great incentive to get into the property market!!

How Much $$ is the First Home Owners Grant?

The First Home Owners Grant is there to assist in the purchase of a first home. In New South Wales the Grant is $7,000 and first home owners are also exempt from paying stamp duty (a mandatory tax in Australia when the sale/transfer of land or real estate is involved) up to a purchase price of $500,000 and for those purchasing over $500,000 pay a reduced amount of stamp duty. That’s a huge saving!

Let’s look at an example for a purchase in NSW:

purchase price $300,000
loan amount $270,000 (assuming FHOG & savings will make up the 10% deposit + costs)
usual stamp duty amount on a $300k purchase price = $8990
stamp duty payable as a first home owner = $0!

Unfortunately for those in Victoria the above example isn’t quite as beneficial:

usual stamp duty amount on a $300k purchase price in Vic = $13,660
stamp duty payable as a first home owner = $13,660
the FHOG in Vic is $7,000 but there is a First home Bonus also for $3,000 or $5,000 which can also be obtained but stamp duty is unfortunately not waived

So why does the FHOG amount differ from state to state?

Each state administers the grant, so each state will determine the rules for the grant. The common rule is that you must purchase for an owner occupied purpose, and you must live in the property for six months out of the first twelve months of ownership! In other words, you can purchase and rent it out for six months but then you must move into it for the remainder of the twelve month period! It also must be your first property purchase and this can get a little tricky if you’re in a relationship and one person has owned before and one hasn’t.

The FHOG is essential to enter the Property Market!

I know from personal experience that the FHOG was essential for me in order to purchase my first home, I simply could not have considered entering the property market when I wanted to without it!! I figured while it was available I would utilize it because who knows when the Govt may change the rules!! The application form is submitted to the lending institution during the loan approval process and they will liaise with the appropriate people and get the FHOG approval done. Or, you can actually submit it yourself but is way more hassle this way. It’s best to let the Bank handle it!

Other resources for First Home Buyers

I wrote a previous post for evey first home owner looking to purchase on an Essential Checklist Every First Home Buyer Should Have! Be sure to use the checklist when considering your purchase!!

For further info on FHOGs in NSW go to
go here!
For further info on FHOGs in Vic go to
go here!

If there are any questions regarding the FHOG, please feel free to drop me a line or post a comment so everyone can benfit from the discussion!!

Looking for your first home is exciting!!

After all, home is the centre of your life! It can be an overwhelming process deciding where to buy and what the best property will be for you, and selecting the right home is much more involved than being happy with glossy fittings and style!!

Every First Home Buyer should review the below checklist before deciding to purchase!

You need to imagine what your life is going to be like in a certain home and what you will gain and what you’ll lose when you purchase the property. In other words considering the big picture and how it will affect you.

use the checklist to select the right house for you!!

The number one consideration for First Home Buyers is: how much can I afford?

This will determine the suburb where you can buy. For example, the inner circle in Sydney holds its value and is pricey whereas the further out you go, the more realistic prices are for First Home Buyers. Of course, there are many other determining factors listed below in the checklist.

I first worked out what I could afford before I started looking for property.

I also knew I needed to be relatively close to the city for work, and I wanted an apartment with lots of amenities and close to transport. Once I had narrowed it down to a few specifics of what I was looking for, it saved me so much time and made the choice a whole lot simpler!!

Here is the checklist for all First Home Buyers!

* What are you able to pay? Is this realistic considering what you want?

* Do you need to be near transport, schools and work?

* What area or suburb do you want to buy in?

* Do you want a house, terrace, semi, apartment or townhouse?

* How many bedrooms and bathrooms do you need?

* How much storage space do you need?

* Do you need parking or a garage?

* Do you want a garden, courtyard or balcony?

* Do you have any special needs?

* Are you prepared to renovate if the property requires repairs or upgrading?

What next?

Once you’ve used the checklist and narrowed it down to a few specific locations, talk to me about a getting pre-approval for your finance so you have piece of mind when it comes to making an offer or attending an auction!!

This is an exciting time and can often be a bit stressful, be confident in the decisions you make, but most of all enjoy the experience!!