FIRST HOME BUYER
Buying your first home can be both an exciting and stressful time.
Now that you’re getting ready to buy, it’s a great time to start preparing your home loan. Try not to leave it the last minute – it’s a good idea to be prepared, know how much you can borrow and who will lend it to you before you find your dream home.
- First Home Owners Grant
- Compare Home Loans
- Maximum Borrowing Power
First Home Owners Grant
The “Great Australian Dream” is to own a home.
However, housing affordability is getting tougher for the first homebuyer – with prices rising quicker than the average person can save. Recent stats show that on a single income it can take between 2.5 – 4.4 years to save a 10% deposit depending on where you live; or between 4.8 – 8.3 years for a 20% deposit. A dual income household fares better with 1.7 – 2.7 years for 10% and 3 – 4.8 years for 20%*
To help first homebuyers enter the market, the Australian government introduced the First Home Owners Grant (or FHOG) on the 1st July 2000. This was originally introduced as a national scheme funded by the states and territories to offset the effect of GST on home ownership. It received a boost in 2008 to help stimulate the housing industry following the Global Financial Crisis (GFC), and has had a few iterations since then.
If you are buying your first home, it’s important to factor this grant into your numbers. You never know, you may be able to purchase sooner than you think!
As the amount of the grant varies by state or territory and you need to meet eligibility criteria, it’s critical that you do your research first and know what you can and can’t do. For example, the purchase will need to be a house that you live in – it can’t be an investment property or holiday house. In most states now, it also needs to be a new house that you either buy or build, not an established one. And obviously it needs to be the first house you have purchased! Another criteria, is the value of the property – so if it’s your first home make sure you check this element before you buy.
To check out all the eligibility criteria and find out how much your grant could be, go to First Home and follow the links to your state or territory.
There are a number of loan types available. It’s important to understand what these are so you can determine what is best for your circumstances or situation.
As a first homebuyer, these three may be relevant to you. There are of course others, so chat to your broker and they can help find the right one for you.
Principal and Interest Loan
This is a loan whereby your repayments are divided into two portions. One portion goes towards paying off the principal or original amount you borrowed from the lender, whilst the remainder goes towards paying off the interest due on your loan.
A fixed loan is where the interest rate is locked in and does not change for a period of time of the loan. This is typically for a period of 1-5 years.
If you have decided to build your first home as opposed to buying an established property you will need to look at getting a construction loan. This type of loan will pay your builder by progressively drawing-down funds as the build occurs – typically in five stages: slab down/base, frame stage, lock-up, fit-out and completion. The amount you can borrow via a construction loan will in part be based on the value of the property upon completion, and will usually be interest-only for the first 12 months and then revert to a principal and interest loan. An advantage of this loan type is that interest and repayments will only be charged on the funds used, not on the total amount you can draw dow
Ask a Broker
As a first homebuyer, it’s important that you have a full understanding of the home loan process and what’s required from you when applying for a home loan.
If you want to chat to someone, give us a call on 1300 135 456, use web chat or fill in our contact form and we’ll give you a call when it’s convenient to you.
Here are some questions you should ask when you chat to us.
- How much deposit do I need?
- How much do I need to allow for government and lender charges?
- What sort of loan should I get?
- Is a fixed loan good for me?
- How much can I borrow?
- What are the monthly repayments?
- If rates rise how much extra will the repayments be?
- What paperwork do I need to provide?
- What happens at settlement?
There are also some questions you should ask yourself. This will help you provide information to your broker that can help guide your loan type, structure and repayments.
- Do you want certainty with your monthly repayments, or are you happy for these to go up (or down) as interest rates change?
- How likely is it that your circumstances will change in the next 5 years? e.g. are you looking to start a family, move interstate or overseas, change jobs or hours worked?
- Do you have any major expenses coming up or that you need to plan for? e.g. will you need to replace a car, are you planning a holiday, do you need to pay for school fees or are you getting married?
Lenders Mortgage Insurance (LMI) – Lenders Mortgage Insurance is a one-off insurance payment that protects your lender. This is required for home loans when more than 80% of the value of the property is borrowed.
We look forward to discussing your home loan needs soon.
We look forward to updating you with home loan news.