Being a first home buyer can at times feel like one to many mountains to climb, following these tips will help take some of the stress out of the buying process and help you secure your first home.
You’ll need a deposit
To obtain the cheapest rate with the lowest entry costs then a deposit of 20 per cent of the property’s value is required. There are however many lenders who will approve a loan with only a 5 per cent deposit.
Keep in mind that the larger the deposit the less you will have to borrow. This could save you thousands of dollars in interest over the life of the loan.
Don’t forget these costs
Unfortunately, there are some costs you may not have expected. First off, lender’s mortgage insurance (‘LMI’) will almost certainly be charged to buyers looking to borrow more than 80 per cent of the total value of the home.
It can be paid as a one-off premium or added to the value of the loan. It protects the lender if you default on your mortgage. Second, loan application fees. These are a one-off payment that covers the costs of establishing the loan.
Finally, you will need legal advice before exchanging contracts with the vendor and when finalising your purchase. Whether you hire a solicitor or conveyancer is up to you, but check that they are right for you before you sign them up.
These are just some of the costs involved. Others include government stamp duty – which can run to several thousand dollars – transfer fees and building and pest inspection charges. Figuring out what costs you will and won’t be liable for should definitely not be left until the last-minute!
Are there special first home buyer loans?
There are literally hundreds of loans available in today’s market for the first home buyer, but two of the most common are fixed and variable interest rate loans.
To put it simply, a fixed rate loan has an interest rate set for an agreed period of time and is therefore not subject to rate changes. Variable rate loans may have rates go up or down depending on broader interest rate movements. Both have their advantages and disadvantages so be sure to ask us plenty of questions prior to making your decision.
Don’t forget, being a first home buyer is (meant to be) exciting! It may not always be fun, running around every weekend for house inspections, so don’t forget your mortgage broker is always available to help on borrowing options and the buying process. It’s a huge step, so enjoy it!