With deposits, home loans, fees, inspections and renovations, home ownership can seem unattainable. We have the services to help you get on the property ladder and secure your financial future.
Purchasing a home is big financial commitment and it can be a confusing process. There’s plenty of choices to make about funding, suburbs, properties, and costs. If you get your first property right, it can strengthen your finances for life – that’s why it’s important to get the right guidance to help you navigate what’s to come.
Affording a property is the first barrier many would-be first home buyers will come up against. Saving for a deposit is an important first step, but you should also keep in mind your borrowing limits and any fees that might crop up during the process.
Aim to have saved around 20% of the value of the home you want to buy. Your deposit can be as little as 5%, but there are lots of benefits to having more cash at the outset like better interest rates and lower loan payments each month.
If your deposit is less than 20%, you’ll need to pay Lender’s Mortgage Insurance (LMI), which is a one-off cost to protect the lender if anything goes wrong later down the line, which could be thousands of dollars. Plus, you may need to find a guarantor where a parent or family member promises to pay your mortgage if you default on a payment.
Before you start looking at the cost of homes, research your borrowing capacity. Speak to a financial advisor about borrowing options available to you. Remember that a bank will often tell you your maximum borrowing capacity. But by speaking to a financial advisor, you will discover how much you should borrow, not simply how much you could borrow.
Over-borrowing is a common mistake among first time buyers. Be sure to future-proof your purchase against unforeseen events such as interest rate rises or if your circumstances change.
There are some different kinds of home loans you should become familiar with:
Variable: interest rates will rise and fall with market changes
Fixed: interest rates are agreed at the outset and won’t change
Capped: rates can fall but cannot rise above a fixed cap
Split: interest is fixed on part of the loan but variable on the other
Fixed period: interest rates are agreed for a set period, e.g. 2 years, 5 years and then change to variable
Stamp duty is a tax that you need to pay to the state government when you buy a property. The total cost depends on the purchase price and differs in each state but it can be a significant cost – in many cases tens of thousands of dollars.
The good news is, you may be entitled to a stamp duty discount or exemption depending on where you live and the property you buy. Different states also have different rules and due dates for when you must pay, so speak to an expert to find out exactly how much you’ll be expected to pay and when it’s due.
First home buyers across Australia can benefit from offers and grants from the government to support them buying their first home. The First Home Owner Grant, or FHOG, is a national scheme funded by states and territories to support first home buyers to get on the property ladder. Each state has slightly different eligibility criteria and available funding, so ensure you research the First Home Owners Grant in your area.
If you’re not yet on the property ladder, you are likely renting in an area that you know and love with good amenities, cafes and restaurants, and entertainment facilities. But properties in these areas often come with a high price tag for home purchase.
First home buyers then face the difficult choice of either moving out of their favourite suburb to buy a property in a cheaper, but less attractive location. Or stay in their suburb, continue to spend money on renting, and hope that one day they’ll have enough of a deposit to buy in their dream location.
However, there is another choice known as ‘rentvesting‘. Here’s how it works:
Rentvestors use their deposit savings to purchase their first property in an affordable, high growth suburb specifically to rent it to tenants
By using their first purchase to become a landlord, rentvestors remain in their current rental accommodation in their chosen suburb
Rentvestors use the profits and equity gain from their investment property to fund a purchase in their preferred location after a few years
Waiting to save up more deposit funds or to get a pay rise at work can take decades. If the property is in the right suburb, it can be as little as two or three years before a rentvestor sees enough return on their investment to boost their savings and purchase a property in their dream location.
Your step by step guide to home ownership
1. Secure your mortgage
Work out how much you can afford in mortgage repayments each month, and find out how much you could borrow from lenders. Once you’ve chosen the best home loan for you, apply and gain a pre-approval certificate to take to inspections.
2. Find a property
Whether you’re buying an investment property or home to live in, it could pay to search in areas that you might not have considered before. Research high price growth suburbs that will give you significant returns when it’s time to sell.
3. Make an offer
Deciding a figure can be difficult, but generally offers are made somewhere between 5–10% below the asking price. But, each property is different and it depends on the pace of the property market at the time of your purchase.
4. Exchange contracts
Once the results of your inspections are in and your final purchase price is agreed, it’s time to exchange contracts and pay your deposit. Hire a professional to check the contract carefully before signing anything – after this point, you’re legally bound to purchase the property.
5. Wait it out
While your solicitor arranges the legalities of your purchase – this usually takes around 6 weeks – your job is to sign any necessary papers, arrange the balance of your mortgage with your provider and secure insurance for the property so you’re covered from day one.
6. Pay for inspections
An unfortunate but necessary cost of purchasing property. Pay for comprehensive inspections (building, pest, electrical, and land/property surveys) to make sure there are no hidden issues that could cost you thousands of dollars to repair in the long run.
7. Settlement
Your funds are transferred from the lender to the vendor and your conveyancer notifies the relevant Government departments of a change of ownership. In other words, the property is now yours! You can finally pick up the keys and let yourself into the property.
8. Pay your stamp duty
Although this is one of the last steps of your property journey, it’s a big one. Plan well ahead for your stamp duty costs as they will account for a good portion of your property budget. Keep aware of the payment deadlines for your state or territory and research how to pay.
9. Relax!
Becoming a homeowner is a big achievement, so take a moment to sit back and enjoy your new property. Shop for furniture, tend to the garden, and invite your loved ones to your new home. Or if you’re becoming a landlord, start the journey to find your perfect tenants.
Buying a house is a complicated process. If it’s your first time, it could help to get professional support to ensure you’re getting the best property, loan deal and legal knowledge. Meet with one of our experts to receive a free personalised investment plan and take the first step towards home ownership.
Take the stress out of home buying with Reventon.
