Interest rates are at an all-time low and the banks are out in force wooing first-home buyers with competitive home loan packages. If you’re in the market for your first home, you may feel overwhelmed by the constant stream of property speculation being played out in the media and the seemingly herculean task of getting onto the property ladder.
Buying your first home is daunting no matter what. “Buying your first home is one of the most significant events that’ll happen in your life,” says St George head of retail Robert Allan.
The following checklist should help simplify the task.
Prepare your finances and set a budget
“The first thing first-home buyers are interested in is how much they can borrow,” says Allan. “They can seek professional advice to determine their borrowing limit.”
While a lender will look at your your income, assets and outgoings to assess how much you can borrow, you should also set your own budget to ensure you don’t over-extend yourself on your first mortgage. Try using a home loans calculator to determine the approximate cost of repayments on various loan sizes.
Choose the right area
Most of us have clear idea about where we’d like to buy our first home – usually close to family and friends, and work and schools – but if your budget won’t allow you to buy in the area of choice, make a list of everything you like about that area and look for a suitable alternative. Also consider a trade-off that would allow you to buy a cheaper home in your preferred area – for example, living next to a train line or on a main road.
Choose the right home loan
This is just as important as choosing the right home and there are many options to consider. From bank or non-bank lender, fixed or variable interest rate, offset account, redraw facility, fees, the ability to make one-off payments, the list of considerations is long.
The secret to choosing a suitable home loan is to do a lot of research, and you can begin on a free financial comparison website such as RateCity.co.au, which allows you to compare and apply for more than 2000 home loans.
As St George’s Allan advises: “There is no one size fits all when it comes to home loans. Our professional advisers can help first-home buyers assess the different options available to them.”
Budget for additional expenses
In addition to saving enough money for the deposit on your first home, there are other associated costs you should be ready to cover, including legal fees, inspection fees, loan application fees (charged by most lenders to cover loan application documentation, legal fees and one standard valuation) and lenders’ mortgage insurance (charged if you are borrowing over 80 percent of your home’s value).
Stamp duty varies from state to state, so once again do your homework and be prepared for the eventual cost. It is also wise to budget for the cost of connecting utilities, as well as council rates, water rates and strata fees if you buy an apartment.
“For a lot of people, especially young families, buying a first home is also a time when they are thinking about their future,” Allan says. “Now is the time to think about your potential circumstances, such as illness or loss of job.”
Income protection and content insurance can give you peace of mind and ensure you are not caught out in unexpected circumstances.
Prepare for the move
Once you’ve found the perfect home, start planning your move to coincide with the settlement date. If you are planning to use a removalist, do some research and get several quotes.
And don’t forget to take some time to enjoy the process. You only buy your first home once.