What are the things you should know before you start looking to buy a home?
“Buying your first home can seem like a daunting task. Entering the property market is expensive and confusing, plus there is so much information you need to be across. However, it is absolutely worth getting your foot in the door and investing in your future with a property.” (urban.com.au)
Why buy a home when you can rent?
“It seems simple, but many people ignore the fact that putting money into your mortgage over someone else’s is always going to be more beneficial in the long run. Sure, it comes with a little more work and expense, but one day that asset could provide you with a steady income through rent, a large sum when sold, or make it easier for you to expand your property portfolio. Plus, if your first home ends up being your forever home you will have a lot of extra money to play with once it is paid off.” (urban.com.au)
Here are seven things you should consider when buying a home:
1. You don’t necessarily need a 20 per cent deposit
“You don’t necessarily need a 20 per cent deposit, but it’s ideal. The prospect of saving a large deposit – say $100,000 for a $500,000 property – can be daunting but lenders do provide mortgages to buyers who have saved less than one-fifth of the purchase price. But you will have to pay for it. Buyers with less than 20 per cent of the purchase price will often be required to pay lenders mortgage insurance (LMI) which protects the credit provider in the case the borrower cannot pay. It can be added to your loan, but the lender can also charge you a higher interest rate.” (abc.net.au)
2. Banks will lend you a scary amount of money
“Having visited a mortgage broker early in the research phase, it became apparent some institutions would have loaned double what my partner and I could afford to repay. The broker entered our earnings, expenses and a modest deposit amount in a program, which returned the different amounts institutions were willing to lend us. Some were offering to lend us well over $1 million, with repayments that would have been unachievable. It could be easy to fall into a trap where you borrow too much to buy a dream home, and then struggle to make the repayments.” (abc.net.au)
Plan your budget with your home loan repayments in mind, use our calculator to get an estimate.
3. There are a range of costs that come with buying a property
“Buying a house is not just a matter of saving up a deposit and then purchasing a house. There are a range of other costs including stamp duty, transfer fees, government fees, charges for building and pest reports, LMI and conveyancing and solicitor’s fees that can add up to thousands of dollars. These all chip into the deposit you have saved and reduce the amount you actually can put into the purchase.” (abc.net.au)
4. Pre-approval is no guarantee of getting a loan
“Many lenders offer a pre-approval service where they will weigh up your income, expenditure and amount of personal debt against your deposit to see if you qualify for a loan. It gives you confidence to go ahead and make offers on properties within your budget, but it is no silver bullet. The full loan approval only comes after the lender receives a signed contract, where they investigate and see if the property is a worthwhile investment.” (abc.net.au)
5. You need to take out insurance the day you sign the contract
“After agreeing to a price with the seller, there is still a settlement period before the buyer can actually move in. Even though it may be 30 days before you pick up the keys, you need to take out insurance on the property in the interim to protect against any damages. The legal liability for damages varies between the states and territories, but some lenders will insist that buyers cover themselves before settlement. It is probably wise to take the advice of your solicitor or conveyancer to learn of your position.” (abc.net.au)
6. Buying at an auction comes with a different set of conditions
“Some agents prefer to sell houses via auction, but it can be a trap if you are unsure of your finances or have doubts about the building and pest reports. In a standard conditional offer you can add a backstop, where if your finance does not get approved or the building has any issues you can pull out. But you do not have that luxury with an auction, meaning if the reserve price is met and you win, you will have no option but to buy the property.” (abc.net.au)
7. The process can feel like a game with changing rules
“Buyers and agents seem to be locked in a game of distrust where everyone is holding their cards close to their chest. I naively thought honesty would be the best approach and was happy to discuss my budget and how much I was looking to spend.” (abc.net.au)
Let us help you!
The decision to buy your first home will probably be one of the most significant steps in your life. It’s exciting, its daunting and navigating the process of finding the right home loan, can be overwhelming. We have created e-book guide (download the e-book guide here) that illustrates out the most important steps in your journey of becoming a first home owner. The Option Guide to “Buying Your First Home” leverages our extensive industry experience and is intended to save you time and money when looking to find the best loan deal.
For most people, getting a mortgage is the most significant financial decision they have made to date. Purchasing a property requires a financial commitment, but the journey doesn’t end there. You’re not just paying for a roof over your head, you’re building equity in an asset that is likely to grow in value over the years.
Moreover, as long as your home is your principal place of residence, it is a tax-free asset. No other investment offers this complete absence of tax.
Most of our clients need a lot more help to work out how they can best allocate their resources to ensure their investment is protected. That’s why we organize a free consultation with one of our lending specialists to assist you with your home loan application process. At Option, our Lending Specialists navigate the entire process, saving you valuable time by searching and comparing hundreds of loans from over 30 leading lenders.
The cost of this consultation is 100% covered by us. Why? Because your future is important to us.
Every client we serve, we want to go above and beyond for. We want to make sure your financial future is secure – and if we do that well, you’ll be able to get your next property sooner.
How it works?
At Option Home Loans, we will meet you at a time and place that suits you. As soon as you contact us or book an appointment, one of our lending specialists will be into touch.
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