Buying your first home is an experience fraught with excitement, anticipation and fear, in constantly changing doses. The main anxiety-inducing aspect of the process is the cost. But don’t despair: here are five ways to save when you are buying your first home and taking on a mortgage.
Accept a lending hand
Why not accept a little help from the government? If you are saving for your first home, you qualify for a First Home Saver Account. Money saved in such an account is tax-free and any interest earned is taxed at a low 15 percent. On top of that, the government will add a 17 percent contribution on amounts you save, up to $5500 per year. So if you deposit $5500 in one financial year, you’ll end up with an extra $935 from the government.
Minimise the cost of stamp duty
The cost of stamp duty – the tax charged on every property sale – depends on how much you pay for your home. Until January 2012, first-home buyers in NSW are exempt from paying stamp duty on properties below $500,000 and receive a discount for homes under $600,000.
If you’re not in a position to buy a home before the end of the year, there are still ways to save on stamp duty. Be aware of the various stamp duty brackets and if you are on the threshold of an increase, try to lower the cost to fall into a lower bracket. If you are building a new home, simply buy cheaper fixtures. If you are buying a home and a saving of a few thousand dollars lands you into a lower stamp duty bracket, negotiate with the real estate agent. It can save you thousands of dollars.
Research your location
You might have your heart set on a certain location, but sometimes a few streets can make a huge difference on the price. For example, the median price of a house in the inner city Sydney suburb of Newtown is $860,000, according to Australian Property Monitors. In neighbouring Camperdown, the median price drops to $815,000 – a saving of $45,000.
Learn to negotiate
Sections of the property market around Australia are now flat, which means it’s a good time to negotiate with a real estate agent for a better deal – and save a few thousand dollars. In areas where there is a buyer’s market, properties often sell for less than the asking price.
Don’t be afraid to make a low offer – a discount of 10 percent or more is a good starting point – and play it cool with the agent. You might be surprised at the result.
Find an affordable loan
Finding the best home loan that suits your needs can save you thousands. Criteria to consider include a low interest rate, payment frequency and flexibility. At RateCity you can research more than 2000 home loans for the cheapest alternative that suits you.