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What options do first home buyers have?

What options do first home buyers have?

Andrea Sophocleous reports on the best options for first home buyers who want to enter the property market and secure a home loan this year.

March 8, 2010

Australians hoping to snap up their first home this year will have to tackle growing property prices, rising interest rates and the continuation of tight lending conditions, all without the help of the Federal Government’s $14,000 First Home Owners’ Boost, which expired on 31 December.

But the news is not as dire as a cursory glance at the market would suggest. The $7,000 First Home Owners Grant is still on offer and while rising, interest rates remain at affordable levels. With the right amount of financial preparation, first home buyers still have a chance to fulfil their home ownership dream.

“There are still incentives out there for first home buyers such as the $7,000 First Home Owners Grant, stamp duty exemptions and first home buyer savings accounts, which are a great option if you plan to buy a home in four years or more,” says RateCity’s CEO, Damian Smith.

Just last month, National Australia Bank reversed its original forecast of a 5 percent decline in property prices for 2010 to predict an increase of 5 percent, fuelled by lower unemployment and growing confidence in the economy. The sooner first home buyers can dive into the market, the higher the likelihood of avoiding the price hike.

Tips for first home buyers

  1. Start a savings plan if you don’t already have one, to help you pull together the deposit but also allow you some leeway once the mortgage repayments kick in. Compare high interest savings accounts on RateCity and take advantage of first home buyer savings accounts offered by several banks. These include high interest rates, a bonus of up to 17 percent p.a. from the government and tax incentives. Keep in mind, however, that you will be locked in for a minimum of four years.
  2. Lower your debts and reduce your credit card limits. This is not just to ease the financial strain on you in preparation for the biggest financial commitment you will ever make – it’s also because lenders determine your borrowing capacity based on your credit limits and debt levels. Compare balance transfer credit cards where some providers offer 0 percent for six months.
  3. Once you are ready, shop around online for home loans and apply for pre-approval. Not having approval can mean the difference between securing your first home and missing a bargain because you are not ready to sign a contract.
  4. Ensure you can afford to meet your mortgage repayments and live comfortably. Factor in any likely rate increases in the short to medium-term, keeping in mind that experts predict a 1 percent rate rise by the end of 2010.

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