Purchasing a new property can be challenging even for seasoned home-owners – but for a first home-buyer, this process can be 100 times more daunting.
In fact, if you’re only just getting started on your journey to becoming a home-owner you may be a bit overwhelmed by all the things you DON’T know. For example, you’re probably wondering how to find out what you are able to borrow. And more importantly – do you know how much can you afford to pay?
Here are four important things every first home-buyer should know.
Knowing these four things will give you the best possible foundation for making smart purchasing decisions.
1. Know how much you can borrow
Once you’ve made the decision to buy a home it’s tempting to start browsing property websites like realestate.com.au in search of your dream home. Our advice? STOP RIGHT THERE!
Don’t even think about looking at property websites until you’ve spoken to your lender and had a conversation about how much you are able to borrow. An even smarter idea is to get pre-approved for your home loan. A pre-approval locks-in the amount you can borrow, subject to certain conditions and for a set period of time (usually three months).
Getting pre-approved for your loan allows you to know in advance how much you can afford to spend on your home. That means when you start looking for a home you’ll be shopping in the right market – and makes it less likely you’ll fall in love with a property that’s way out of your price range.
It also means that when you do find the right property you can confidently make an offer, knowing that your finance is sorted. This gives you a distinct advantage over other buyers who haven’t been approved for a loan.
2. Know the real costs
Finding a property at the right price is important – but the real cost of buying a home is more than just the actual sale price of the property.
Depending on how much you’ve managed to save for your deposit, lenders mortgage insurance (LMI) could be one of your biggest purchasing costs.
You may have heard that you should aim to have a 20% deposit before you buy. This is because if you borrow more than 80% of the purchase price you’ll have to pay LMI, which covers your financial institution if you default on your home loan.
While having less than a 20% deposit may allow you to buy your first home sooner it can also add several thousand dollars to your loan. If this applies to you make sure you ask your lender to give you an estimate of what the LMI is likely to be so you can take it into consideration
Other purchasing expenses you’ll need to take into account include…
- Home loan application fees
- Stamp Duty – work out how much your stamp duty will cost with our stamp duty calculator.
- Legal fees
- Mortgage registration fee
- Building and pest inspections
- Moving costs
- Insurance – this is a condition of loan settlement
Did you know that you can pay fortnightly at no extra cost when you purchase your insurance through MOVE Bank? Click here to get a quote
3. Know how to manage your finances
While it sounds simple, creating a budget is one thing which is seriously underrated. To begin your budget plan it is important to know exactly how much money you have coming IN, versus how much you have going OUT in the form of financial commitments, major bills and living expenses.
One thing which can be easily forgotten when creating a budget is to factor in your living expenses- and it pays to be realistic! If you know that you like to head to the movies every Tuesday or out to brunch on a Sunday, make sure you factor this in. There is no point creating a super strict budget which isn’t realistic as there is more of a chance you will ditch the budget and dip into your deposit savings.
When working out your budget it is essential to factor in the new costs of being a homeowner. As a first home-buyer rates bills and even water bills might seem completely foreign to you.
Rates are one of those bills which will appear in the mail on a quarterly basis and are calculated for each property based on land valuations and rating categories. Other levies and waste management charges will also be included. When looking at the 2015/2016 Brisbane City Council statistics, average rates bill in the Brisbane area can cost anywhere between $700 and $2600 depending on the suburb in which you live 1. In addition to your rates, it’s likely you’ll also need to spend some money each year on routine maintenance to your property so make sure you include this in your calculations.
Home Loan Repayments
When working out how much you should start saving it is important to factor in what your future mortgage repayments might look like. You can use the MOVE Banks home loan repayment calculator to work out how much you should start putting away every fortnight, and if you can afford any extra it is a good idea to put this in too! Having these funds in a high-interest saver will mean you can start earning extra dollars off your deposit nest egg and will help you reach your deposit goals a little bit quicker. When it comes time to buy, showing a mortgage lender a solid savings history will really boost the strength of your home loan application.
4. Know your lending specialist
Your home-loan is likely to be the greatest financial commitment you ever make. With a decision this important, you need someone in your corner you can turn to for advice and provide answers to the hundreds of questions that will be racing through your mind.
That’s why it’s important to get to know your lending specialist right at the beginning of your home-buying journey. The right lending specialist will be able to give you advice on everything from how to maximise your deposit savings to which loan type is right for your individual situation
MOVE Banks lending specialists are committed to helping you every step of the way and are more than happy to touch base throughout the savings process. You can think of them as your home loan guru!
Are you ready to take the first step towards becoming a first home-buyer?
Get in touch with a MOVE Bank lending specialist today and get into your first home sooner!
Call us on 1300 362 216 or enquire online here
Insurance issued by Insurance Australia Limited ABN 11 000 016 722 trading as CGU Insurance. Any advice is general only. Consider the relevant PDS available from cgu.com.au to see if a product is right for you.
This blog post is for general information purposes only and is not intended as financial or professional advice. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product or other professional advice. You should seek your own independent financial, legal and taxation advice before making any decision about any action in relation to the material in this article. Railways Credit Union Limited trading as MOVE Bank ABN 91 087 651 090. AFSL/ Australian Credit License number 234 536 | ABN 91 087 651