Buying your first home can be an experience mixed with feelings of excitement and trepidation.
It doesn’t have to be a scary process as there are plenty of professionals out there who can help you manage the process, including applying for a first home buyer loan.
What costs are involved in buying a first home?
In today’s real estate environment, saving a deposit is the hardest part of the process – and it’s been that way for most generations, too.
Not only have property prices increased significantly over recent years, but lenders are not as generous as they used to be. That means that first home buyers will generally need at least 10 per cent of the purchase price to buy a home – although there are a few lenders that are still offering 95 per cent home loans.
These will generally require principal and interest repayments and may carry a dearer interest rate but they are available. So, if you’re buying a property worth $600,000, you’ll potentially need $60,000 to qualify for a first home buyer loan.
Here’s a list of potential fees and costs – some often forgotten or not accounted for – that you may be required to pay:
Pest and building inspection
Loan application or establishment fee
Lenders mortgage insurance
Document preparation fee/legal charges
Bank valuation fee
Registration of title
Council and water rates
Body corporate or strata fees
Legal searches and enquiries
How much can you borrow?
Saving 20 per cent of $600,000, for example, would be quite difficult for many prospective homebuyers so it’s more likely they will have a deposit lower than that amount.
Now it’s important to realise that banks are still lending money, even if they’ve tightened the screws somewhat of late.
So, even if you have five or 10 per cent as a deposit, as well as a good credit history, lenders will still be interested in you becoming one of their home loan customers.
It’s also important to understand which banks are best suited to you, by using a mortgage broker for example, as well as getting a handle on any Lenders Mortgage Insurance implications if your deposit is less than 20 per cent.
Can I get the first home owners grant?
Back then, the grant was available on all types of property and was worth $7,000, which was a substantial proportion of a property’s price in those days.
Since then, the grant has been changed to reflect different economic circumstances.
For example, during the GFC, the grant was doubled to $14,000 for first home buyers of established properties and tripled to $21,000 for new homes to stimulate the construction sector as well as the wider economy.
What loans are on offer to first home buyers?
These special first home buyer loans can include unique features or lower introductory interest rates.
Some of the products on offer may also have reduced or non-existent application or ongoing monthly fees.
In fact, there are so many first home buyer loans on the market that it can confusing for the uninitiated as well as being difficult to determine which one is the right one for you.
That’s why, using a mortgage broker who specialises in property investment can be a good strategy to navigate the many products on offer.
Make sure you do your homework, not just on home loan options but also on the area you are looking to buy in so that your hard work saving up a deposit isn’t undone if you are potentially unhappy in your new home.