Buying your first home can be both exciting and overwhelming, but with the right advice, the process becomes much simpler.
How much deposit is required?
For first home buyers, a deposit of at least 5-10% of the purchase price is generally needed. However, if you can provide a deposit that results in a loan under 80% of the property value, you can avoid paying Lenders Mortgage Insurance (LMI).
Genuine Savings
Many lenders require proof of "genuine savings," particularly if your loan exceeds 80% of the property value. Genuine savings show a lender that you're financially responsible. To qualify, you typically need to show 3-6 months of consistent savings in your account. Keep in mind that not all lenders have this requirement, but most do.
Gifted Deposits
If you're receiving deposit funds as a gift from a family member, the lender will require a “gift letter” to confirm that the money is not a loan. This ensures your ongoing expenses aren't affected by repayments to the family member.
Guarantor Loan/Family Pledge Loan
Another option is a guarantor loan, where a family member's property is used as security. This allows you to avoid LMI by leveraging their equity. For example, if your parents’ home is worth $800,000, the lender can use their home as additional collateral to cover the required deposit for your new purchase.
What fees are required when purchasing a home?
Interest rates and available loan products depend on your financial circumstances. As a first home buyer, you may want to maximize your borrowing power, but this doesn’t always result in the lowest interest rate. Often, the difference in rates is negligible (around 0.10%), so focusing on borrowing power may be more beneficial.
It’s essential to have pre-approval from a lender that offers flexible options, allowing you to secure the best deal once you’ve found your property.
Other fees to consider:
Government Fees:
Stamp Duty: A tax on your property purchase. (Check state requirements.)
Transfer Fee: Government fee for transferring the property title into your name.
Registration Fees: Charged to register your mortgage on the property title.
Other Fees:
Conveyancing: Legal representation for your purchase, ranging from $800 to $1,500.
Inspections: Building, pest, or strata reports, usually costing under $500.
Home Loan Fees: Application, settlement, or valuation fees may apply, ranging from no fees to over $900, depending on the bank.
Lenders Mortgage Insurance (LMI): Required if borrowing more than 80% of the property value, this one-time fee protects the lender in case of default.
Am I eligible for the First Home Owners Concession and/or Grant?
Eligibility for the First Home Owners Grant varies by state but generally includes the following criteria:
The property must be purchased in your personal name.
At least one person on the title must be an Australian citizen, New Zealand citizen, or permanent resident.
You must be at least 18 years old.
The property must fall under a value cap specific to each state.
None of the applicants can have previously purchased a primary residence.
At least one person must reside in the home for 12 months.
The property must be new or a build to qualify for the grant.
By understanding these requirements and fees, you’ll be better prepared to make informed decisions as a first home buyer.
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