First Home Buyers – Read Finance

Vital Tips to Purchasing a First Home in Australia

17/01/2024 Jesse Read No Comments

Embarking on the journey of purchasing your first home is both exhilarating and challenging. It’s a milestone that represents stability, investment, and personal achievement. However, the process is filled with complexities that can be daunting for first-time buyers. This guide aims to demystify the home-buying process, providing step-by-step advice to ensure a smooth and informed experience. From financial planning to understanding the intricacies of real estate, we’ll cover the key aspects that every first-time buyer should know.

The importance of being well-prepared when entering the housing market cannot be overstated. The decisions you make during this process will have long-term implications on your financial health and quality of life. Therefore, it’s essential to approach this journey with a solid plan and a clear understanding of the dynamics involved. We’re here to help you navigate these waters, making your transition from prospective buyer to homeowner as seamless as possible.

1. Understand Your Budget

The cornerstone of your home-buying process is understanding and setting a realistic budget. This step involves a thorough assessment of your financial status, including income, savings, debts, and credit score. It’s crucial to have a clear picture of how much you can afford in terms of mortgage payments, keeping in mind that your housing costs should not exceed a certain percentage of your income.

Budgeting for a home purchase goes beyond the mortgage payments. You need to consider additional expenses such as property taxes, insurance, maintenance costs, and purchasing fees such as legal and application fees. Overlooking these aspects can lead to financial strain, so it’s vital to incorporate them into your budgeting plan from the outset.

2. Know Your Borrowing Capacity

Understanding your borrowing capacity is another critical aspect of the home-buying process. This involves getting pre-approved for a mortgage or talking to a broker to get an understanding of your borrowing capacity. This will give you a clear idea of the amount a lender is willing to finance.

Pre-approval is beneficial for several reasons: it sets realistic boundaries for your house hunt, it shows sellers that you are a serious buyer, and it can give you a competitive edge in a crowded market.

In addition to obtaining pre-approval, it’s important to explore different types of mortgages and lenders to find the best fit for your personal situation. Consider the interest rates, loan terms, and any additional fees associated with the mortgage. It’s also wise to consult with a mortgage broker to better understand your options and the long-term implications of your mortgage choice.

3. Research Neighborhoods

Selecting the right neighborhood is as important as choosing the right house. It’s essential to consider factors like safety, proximity to work, schools, and amenities, as well as the overall lifestyle the neighborhood offers. Think about your long-term plans and how the area fits into those plans. Does the neighborhood have growth potential? What are the local property values like? These are important considerations.

Additionally, try to get a feel for the community’s culture and vibe. Visit the neighborhood at different times of the day and week, talk to residents, and read up on local news and developments. This will give you a clearer picture of what life would be like in that area and whether it aligns with your preferences and lifestyle.

4. The Importance of a Home Inspection

A comprehensive home inspection is a crucial step in the home-buying process. It involves a professional evaluating the property to identify any potential issues that might not be visible during a regular visit. This inspection covers various aspects of the house, including the foundation, roof, electrical systems, plumbing, and more. The insights gained from a home inspection can save you from expensive surprises in the future and provide leverage in negotiations with the seller.

The home inspection process is also an educational opportunity. It allows you to learn about the condition and maintenance needs of the property. This knowledge is invaluable, as it prepares you for the responsibilities of owning that home. In some cases, the results of the inspection may even lead you to reconsider the purchase, which is far better than discovering significant issues after purchasing the property.

5. Factor in Additional Costs

When calculating the cost of buying a home, it’s important to look beyond the listing price. There are numerous additional expenses that buyers often overlook. Application fees, Lenders Mortgage Insurance, property valuation fees, legal costs, and more could add up to a significant amount.

After moving in you may face costs for repairs, renovations, furnishings, and ongoing maintenance. Not to forget property rates, utilities, and insurance. These recurring expenses should be factored into your ongoing budget to ensure financial stability and avoid surprises.

6. Secure Financing

Securing financing is a complex but crucial part of the home-buying process. It’s not just about finding a lender but also about understanding the terms of the loan, the interest rate, and how these factors affect your monthly payments and long-term financial planning. Comparing offers from multiple lenders can help you find the most favorable terms.

When choosing a mortgage, consider different types, such as fixed-rate, adjustable-rate, and government-backed loans. Each type has its pros and cons, and what’s best depends on your individual circumstances, including your credit score, income stability, and how long you plan to stay in the home.

Mortgage Brokers wrote 71.5% of new residential loans between July and September of 2023, and are often used as they are experts on writing home loans and helping people through the process of acquiring their home. We at Read Finance specialise in first home buyers purchasing their first residential property, so reach out for a meeting so we can discuss you’re circumstances and how we can help you.

7. Negotiate and Close the Deal

Once you’ve found your ideal home and have your financing in place, the next step is negotiating the purchase. This can be a complex process, involving offers, counteroffers, and potentially competing with other buyers. Although not required a buyer’s agent may negotiate on your behalf.

After reaching an agreement with the seller, you’ll proceed to close, which involves signing paperwork, transferring funds, and title registration.

Understanding the closing process and preparing for it in advance can help ensure everything goes smoothly. Buyers need to work closely with their solicitor or conveyancer, lender or mortgage broker, and real estate or buyer’s agent throughout this process to ensure all legal and financial requirements are met for a successful property transfer.

Conclusion

Buying your first home is a significant milestone, filled with excitement, challenges, and learning opportunities. By understanding your budget, knowing your borrowing capacity, thoroughly researching neighborhoods, conducting a comprehensive home inspection, preparing for additional costs, securing the right financing, and effectively negotiating the deal, you can navigate the process more confidently and successfully.

Remember, this is not just a financial decision but also a lifestyle choice and a long-term commitment. With thoughtful planning and informed decision-making, your dream of homeownership can become a rewarding reality.

Remember if you want to make an informed decision regarding your home loan, how much you can borrow, or the steps involved reach out to me. Jesse here at Read Finance.

First Home Buyers

9 Saving Tips for First Home Buyers in Australia

26/10/2023 Jesse Read

Purchasing a first home is a dream cherished by many, especially when the landscape of the Australian property market can be at times competitive.

Aspiring homeowners often find themselves navigating a maze of financial planning, market research, and strategic decision-making. With the right strategies and insights, this journey can transform from a daunting challenge into a rewarding experience. This guide helps to provide first home buyers with advice to pave their path towards homeownership in Australia.

1. Know What to Expect

Entering the world of homeownership in Australia requires not just enthusiasm but also a keen understanding of the landscape. Begin by immersing yourself in thorough research of prospective areas. It’s intriguing how two suburbs a stone’s throw from one another, could have drastically different property values.

You may find that local amenities, from the latest infrastructure projects like a train station to basic facilities like schools and parks, significantly influence these values. Another element to consider that I hear more often than not is the overall safety of the neighbourhood, as areas with low crime rates tend to be more desirable, leading to a hike in property prices.

Even after narrowing down on the perfect locality and home, it’s essential to recognize that the upfront price is just the tip of the iceberg. Transfer Duty also known as Stamp duty, Lenders Mortgage Insurance (LMI) and other costs can take buyers by surprise.

Then there are inspection fees to help with finding structural nightmares. Factor in legal fees, the cost of potential initial repairs or modifications, and even the price of moving, and you’ll find that the total can be considerably higher than the property’s listed price.

2. Start Your Savings Habits

The journey for many to gain savings for a home loan deposit begins with a single step. While many start saving a portion of their pay without an issue, consistency is where the challenge lies.

One trick that many swear by is having your weekly savings goal deducted from your pay. By setting up a bank transfer to a different savings account every time you are paid, you subtly shift saving from an active chore to a passive routine.

Regularly revisiting your financial growth is as crucial as the act of saving itself. By consistently monitoring your progress, you can adjust your saving rate, cut back on non-essential expenditures, or even occasionally reward yourself when you hit certain milestones. This keeps the journey balanced and motivating.

3. Address Your Debts

Focusing on your debts can be a significant step toward building your savings. Debts with high interest, such as credit cards, can be insidiously detrimental, quietly draining what could have been potential savings. Tackling these debts head-on can feel daunting, but there’s a method to the madness.

Some advocate for the “snowball method”, where you pay off smaller debts first, creating a momentum that motivates you to address bigger loans. Others swear by the “avalanche method”, focusing on clearing high-interest debts first, which can be more financially efficient in the long run.

One of the keys to reducing debt isn’t just addressing past debts but also being wary of accumulating new ones. This doesn’t mean living a life devoid of any credit-based facilities. It’s about thinking about when to borrow and ensuring it aligns with your long-term homeownership goal.

Lastly, if the weight of debt ever feels crushing there are professional debt counsellors who can provide strategies or even help in negotiations with creditors. You may qualify for free debt services but you’ll need to enquire with each company to ensure you are eligible.

4. The Power of Compounding

The beauty of compound interest lies in its simplicity: your money makes more money. When we hear stories of individuals who’ve managed to amass significant savings, the secret often isn’t just a high income or extreme frugality, but using the power of compounding.

There are multiple ways you can compound your money but each comes with its own risk. High-interest savings accounts are of these options useful when keeping the money for a home loan deposit. Consistently adding to your savings not only do you increase the principal amount, but can potentially also add interest earned while that principal grows too.

5. Government Grants and Concessions

The Australian government has been aware of the challenges faced by first home buyers and because of this, it has rolled out several grants and concessions over time to provide some relief. These can be beneficial by easing the financial burden of purchasing a home. Some of the key aids and concessions include:

First Home Owners Grant (FHOG): A one-time grant designed specifically for eligible first home buyers.
Transfer Duty Concessions: Depending on your location and the property’s value, you might be eligible for a considerable reduction in transfer duty. Also known as Stamp Duty.
First Home Guarantee Scheme (FHBG): Support first home owners buying a home with a deposit as low as 5%.

If you are interested in what grants may be available to you contact us or look at your state government or specific grant government websites.

By factoring in these grants and concessions, your goal of homeownership might be closer than you initially estimated. These grants, concessions and schemes change over time as new policies or modifications of existing ones to address current market conditions or economic challenges.

6. Seek Expert Advice

The property market can often feel like a labyrinth. Expert advice doesn’t just offer clarity but could also open doors to opportunities you were unaware of.

Mortgage brokers like us at Read Finance can provide valuable advice based on your specific needs and goals. Beyond applying for a loan based on your needs, goals and input they also understand its terms, interest rates, and potential pitfalls. This is how they provide a valuable service to you.

Financial advisors, on the other hand, take a more holistic view. They may be able to assist in:

Streamlining your savings strategy
Offering investment advice
Assisting with budgeting and expenditure tracking

Real estate and buyer agents can show you properties that they have available to them. Providing advice and insight into the market. Just be aware that the real estate agent works for the seller while a buyer’s agent works for you.

Together, with the right guidance, the path to home ownership can become less about avoiding pitfalls and more about making informed, strategic decisions.

7. Alternative Revenue Streams

In today’s gig economy, opportunities for additional income are more abundant than ever before. Many first home buyers find that their primary job, while stable, may not provide the acceleration they need to meet their savings goals in the desired timeline. Diversifying your income streams can not only boost your savings rate but also provide a safety net against unforeseen financial challenges.

For instance, freelancing or part-time work in areas aligned with one’s skills or passions can prove lucrative. Whether it’s graphic design, writing, tutoring, or even pet-sitting, platforms like Upwork, Freelancer, and Airtasker could have access to additional work for you.

If available, you could rent out a vacant room or parking spot. Platforms like Airbnb have made it easier for individuals to monetise their unused spaces, turning them into significant monthly earnings with relatively little effort.

Just be aware that when going for a home loan each lender has their own criteria on how they assess additional income. Some lenders will shave off a percentage of the income you earn.

For example: Instead of taking into consideration all of your income from a second job, they may only let you use 80% of it.

8. Cut Down Unnecessary Expenditures

Budgeting isn’t just about saving but also about spending smartly. Knowing where your money is going and how to take it further can help in the savings process for a deposit on a property.

Here are some everyday savings tips:

Home-Cooked Meals: Regular dining out or takeaway might seem innocuous, but it can amount to a significant monthly expense. Shifting to home-cooked meals can lead to considerable savings.
Review Subscriptions: From streaming services to monthly magazines, it’s easy to accumulate subscriptions we hardly use. Regularly reviewing and removing these can free up funds.
DIY Solutions: Instead of hiring services for tasks like cleaning, gardening, or even basic home repairs, considering a DIY approach can save money.
Refinance Loans: If you have various loans and credit cards there may be an option to combine them into one repayment at a lower rate.

9. Stay Updated and Educate Yourself

Knowledge is power, especially in the rapidly evolving landscape of the Australian property market. Staying updated doesn’t just mean being aware of price trends but understanding the larger economic, political, and social factors that influence these trends.

Regularly perusing property-focused blogs, attending webinars, and even joining community groups can provide valuable insights. Platforms like the blog on Read Finance could offer a treasure trove of information, from government policies to property.

Consider also joining local community groups or forums. These platforms can provide the benefit of firsthand knowledge from experienced individuals in the areas you’re looking to buy into.

Pre-Approval vs Pre-Qualified Home Loans

Guides

Pre-Approved vs Pre-Qualified – Home Loan Terms Explained

04/09/2023 Jesse Read

Some clients of mine have been using these terms interchangeably, not realising that both pre-approved and pre-qualified are two completely different terms when getting a home loan. Knowing the difference between the two is vital so you aren’t disappointed later on, and know the terms equips you with the right information.

If you have a pre-approved home loan it means that the lender has checked the information you have submitted and provided a figure they believe they may lend you, while a pre-qualified home loan provides you a figure the bank estimates it may lend to you without having verified your information.

It is important to note that neither of these guarantees that the lender will write the home loan. Your circumstances or the lender’s product could change from the time you received the information and the time you apply for the loan.

Pre-Approved

Getting a pre-approval requires a lot of the same steps as applying for a loan, getting the lender to assess your situation to provide an amount that they may lend you.

Information provided to the lender includes:

Income
Assets
Liabilities

Pre-approval comes with more weight than a pre-qualified loan due to the verified information. Though this still can be affected by property valuations, changes in circumstances and property types. A good example would be if someone applying for a loan lost their income source or job.

Pre-Approval Process

The process to obtain a pre-approved home loan is as follows:

Meet with your mortgage broker
At Read Finance we would first have a complimentary meeting to find out what you are after and to see what your financial goals are. Here we can provide you with documentation and answer any questions you may have. We will stay in touch with you through this process and after.
Documentation Request
You will need to provide the information and documentation that we request to fulfil the lender’s requirements and our compliance.
Conditional Pre-approval
Also known solely as a pre-approval, it will have requirements and conditions listed needed for them to provide the home loan to you.
Search for a Home
You now have an idea of how much the bank is willing to lend you as well as the conditions and additional requirements that you need to fill. Use this information while searching for your new property.

Common Conditions for a Pre-Approval

The conditions that a lender could give you varies for each person due to different lender product and current lender requirements. but here are some common conditions you may be provided with.

No changes in your financial position.
Verification on details you have provided.
A valuation of the property that satisfied the lender.

These will be provided to you so you will be well aware of what they are.

Pre-Qualified

Getting pre-qualified will provide you with an estimate of how much you might be able to borrow from a lender. This is done without verifying your financial information and in turn, means that you have not applied for a loan.

Get Help

Getting professional help for one of the largest purchases in your life is important. Reach out to us at Read Finance and let us help guide you through the process.

Book a complimentary meeting where we can assess your situation and talk about whether you’re interested in a pre-assessed or pre-qualified home loan.

First Home Buyers

9 Tips for First Home Buyers Looking at Properties

21/08/2023 Jesse Read

Buying a home is a monumental decision, marking not only a significant financial investment but also a commitment to a new chapter in one’s life. For first-time homebuyers, the process can be both thrilling and daunting, filled with dreams of the perfect dwelling and the complex realities of the housing market.

The path to homeownership involves numerous considerations, ranging from understanding what can be changed about a property to meticulously evaluating the exterior, sniffing out potential problems, considering maintenance responsibilities, and wisely navigating negotiations and professional collaborations.

This comprehensive guide is designed to assist first-time homebuyers in navigating these multifaceted considerations. Whether you’re just starting your home search or are about to make an offer, these tips will help you approach the process with foresight and clarity.

1. Know What Can Be Changed

Image looking over Pacific Pines, Queensland, Australia. — The suburb of Pacific Pines, Queensland, Australia

Understanding Property Limitations: Assess what elements of the property are permanent and what can be renovated or modified. Evaluate how these limitations align with your long-term goals and lifestyle needs.
Location Evaluation: Since location is usually unchangeable, thoroughly explore the neighbourhood and potential neighbours before submitting an offer. Investigate local amenities, safety, and community culture.
Zoning Regulations: Make sure you understand local zoning laws and restrictions that may affect future changes to the property. Consult with local authorities or a real estate lawyer to clarify potential legal barriers.

2. Review the Exterior

Exploring Surroundings: Pay attention to your potential home’s surroundings, considering neighbouring properties, proximity to parks, shopping centres, and noise levels. Check for future development plans that might affect the area.
Checking Privacy: Determine if neighbouring properties overlook crucial areas like your garden or bedroom. Consider planting trees or building fences to enhance privacy if needed.
Assessing Traffic and Noise: Consider the property’s location relative to busy roads and noise pollution at different times of the day. Visit at various times to get an accurate sense of noise levels.

3. Sniffing Out Potential Issues

Detecting Odors: Be vigilant about strong smells that may signal problems like mould or mildew, which could lead to significant expenses. A professional inspection may be required to ensure no hidden issues.
Beware of Masking Scents: Air fresheners, baked goods, fresh paint and even candles may be used to disguise unpleasant odours. When looking at a property keep these things in mind. They also may be used as a sales tactic to entice you into having a favourable view of the property.

4. Identifying DIY Repairs

Spotting Amateur Work: Look for rushed or incomplete repairs, including messy plumbing, carpentry, electrical work, and other incomplete projects. Consider hiring a professional inspector to assess the quality of work.
Inspecting for Damages: Pay attention to leaky taps, missing tiles or flooring, and other signs of poor maintenance. These may indicate a lack of care in other unseen areas of the home.

5. Considering Garden Maintenance

Evaluating Garden Size: While a large garden might seem appealing, consider the amount of work required to maintain it if you’re not accustomed to gardening. Don’t forget about the amount of mowing, whipper snipping, and poising required too on large blocks of land.

6. Taking a Deliberate Approach

Avoiding Sales Pressure: Real estate agents may pressure you into making a quick decision; take your time to research and feel comfortable with your choice. Have a clear understanding of your priorities to avoid impulsive decisions.
Negotiating Wisely: Remember the importance of this purchase and don’t be afraid to negotiate or walk away from a bad deal. A patient approach may lead to better terms and a more suitable property.

7. Seeking Second Opinions

Getting Objective Views: Invite a family member or friend to an open home as they may spot potential problems that you may overlook due to emotional investment. Their unbiased perspective can provide valuable insights.
Hiring Professionals: Consider hiring a professional home inspector to identify any hidden problems. An expert’s evaluation helps to ensure that you’re making a well-informed decision.

8. Collaborating with Professionals

Work with a Mortgage Broker: Find the right mortgage to work with like Read Finance. A broker’s expertise can help you find a mortgage tailored to your financial situation from a vast amount of lenders.
Engaging a Real Estate Agent: Find a reputable agent to help navigate the process, and possibly an attorney to handle legal aspects. Their experience can streamline the process and mitigate potential legal challenges.

9. Keep your Emotions

Using Logic over Emotion: Keep emotions in check and approach the buying process with a logical, analytical mindset. Avoid letting emotional attachment to a property override critical thinking.
Setting a Realistic Budget: Be mindful of your financial limitations and ensure that your purchase aligns with your long-term financial goals.

Conclusion

Buying your first home is an exciting yet complex process that requires careful planning and consideration of many factors. From understanding the property’s limitations to scrutinizing the exterior, detecting hidden issues, considering garden maintenance, and seeking professional help, these comprehensive guidelines can assist first-time homebuyers in making an informed and confident purchase decision.

Collaborating with real estate professionals like agents and mortgage brokers can further ease the process, ensuring that the first-time homebuyer achieves a satisfying and successful homeownership experience that aligns with their lifestyle, preferences and financial capabilities. By taking a deliberate approach and focusing on both tangible and intangible aspects, first-time homebuyers can turn their dream of owning a home into a rewarding reality.

First Home Buyers

10 Things Every Australian First Home Buyer Should Know

14/08/2023 Jesse Read

As a proud Australian and a homeowner, I know firsthand that navigating the property market for the first time can be overwhelming, even daunting. You’re not just buying a house but you’re investing in your future, and that’s a huge step! The process can seem complex, full of unfamiliar terms and hidden expenses. However, becoming well-versed in the fundamentals of buying a home can take much of the anxiety out of the process.

As someone who has been in your shoes, I’ve put together a list of 10 key things that every Australian first home buyer should know. This is the knowledge I wish I had had at my fingertips when I was embarking on my own home-owning journey.

1. Get a Mortgage Broker

Mortgage brokers may be incredibly helpful for first home buyers, and I am not just saying that because we are a Mortgage Broking company. They have access to a range of loan products from a variety of lenders, including banks, credit unions, and other financial institutions. This means they can help you find a loan that suits your specific needs and circumstances.

Using a mortgage broker could potentially save you time and effort as they will handle the loan application process for you. They also understand the ins and outs of home loan products and can negotiate on your behalf. With them now having to follow the Best Interest Duty, you’ll know that you’re getting professional advice tailored to your needs.

2. Familiarize Yourself with Transfer/Stamp Duty

Transfer duty, also known as Stamp Duty outside of Queensland is a tax levied by Australian states and territories on property purchases. It’s often the largest expense a home buyer will face, outside the purchase price. The exact amount varies greatly depending on where you live, the value of your property, and whether it’s your primary residence.

There are often concessions and exemptions for first home buyers which can significantly reduce the amount of stamp duty payable. These vary by state, so it’s crucial to understand the specifics for the location you are purchasing in.

Speak to a mortgage broker or conveyancer to understand what your stamp duty obligations could be and what options you have available to you.

3. Grants

The First Home Owners Grant (FHOG) is a national scheme funded by the states and territories of Australia designed to help first home buyers. The grant varies from state to state and has specific eligibility criteria such as, but not limited to, the property value, whether the property is new or existing, and whether the buyer is an Australian citizen or permanent resident.

Application for the grant is generally made during the home loan application process, but it can also be completed post-settlement. It is important to take note that receiving the FHOG does not rule out stamp duty costs. In certain states, concessions or exemptions from stamp duty may apply for first home buyers, but these are separate to the FHOG.

If you want to find out what Grants are available, check out this article I wrote called Who is a First Home Buyer.

The rules can change, and the specifics can differ greatly between states, so be sure to do your research before relying on this scheme. Talk to your mortgage broker or look up the grants available to you from the correct government sources to get the most accurate and up-to-date information.

4. Learn about Loan-to-Value Ratios

The loan-to-value ratio (LVR) is a critical concept for any first home buyer to understand. Essentially, it’s a percentage that reflects the amount of your home loan compared to the value of the property. An old saying I hear a lot is that you require a LVR of 80% to buy a home, which means you’ll need a 20% deposit. This is not always true, read on to see why.

If you can’t save a 20% deposit, you may still be able to get a home loan. You’ll likely need to pay Lenders Mortgage Insurance (LMI) though, depending on the requirements of the lender. LMI protects the lender in case you default on your loan and can be a significant extra expense.

While a high LVR might enable you to buy a home sooner, it can also increase your financial risk if property values fall. Make sure to assess your financial situation carefully and consult with mortgage broker to understand your LVR options and LMI obligations.

5. Research the Market Thoroughly

As a first home buyer, it’s essential to research the property market extensively. Keep an eye on property prices in your desired area, inspect as many properties as possible, and monitor market trends. Understanding the local property market can give you an edge when negotiating a purchase price.

Attending open homes and auctions is a good way to familiarize yourself with the buying process. You’ll also start to understand what you can realistically afford and what type of properties you like.

Additionally, consider seeking advice from professionals. Real estate agents, mortgage brokers, buyers agents and financial advisers can provide invaluable insights and advice based on their industry knowledge and experience.

6. Get Pre-Approval for Your Home Loan

Before starting your property search, it’s wise to get a pre-approval for your home loan if that option best suits your needs. Pre-approval gives you an idea of how much a lender is willing to loan you, allowing you to focus your property search on homes within your budget.

It’s important to remember that pre-approval isn’t a guarantee that a lender will give you a loan, but it’s a strong indication of the amount they’d be willing to lend. It also demonstrates to real estate agents and sellers that you are serious about purchasing.

Pre-approval typically lasts for 3-6 months, so ensure that you’re ready to start looking for a property once you get pre-approval. If you haven’t found a property within the pre-approval period, you’ll likely need to apply again or get an extension if the lender offers it.

7. Beware of Extra Costs

When budgeting for your first home, it’s crucial to factor in additional costs beyond the purchase price. These can include building and pest inspections, conveyancing fees, moving costs, home and contents insurance, council rates, and utilities. I’ve written an entire article on it called First Home Buyer – Extra Costs to Consider.

Many of these costs arise before moving in, so you’ll need to have funds available to cover them. Understanding these costs early can help you budget appropriately and avoid any nasty surprises down the track.

It’s always recommended to have an emergency fund in case of unexpected costs. Property ownership can come with unexpected expenses, such as urgent repairs, so being prepared can give you peace of mind.

8. Understand the Contract of Sale

The contract of sale is a legally binding agreement between you and the seller. It outlines the terms and conditions of the sale, including the purchase price, settlement date, and any conditions such as building inspections or finance approval.

Before signing a contract of sale, have it reviewed by a solicitor or conveyancer. They will ensure you understand all the terms and conditions before you commit. If you’re buying at auction, this needs to happen before the auction day as a sale at auction is unconditional.

It’s also vital to understand cooling-off periods. A cooling-off period allows you to withdraw from the sale after signing the contract, but rules vary from state to state. Make sure you’re clear on your rights before signing anything.

9. Inspect the Property Thoroughly

Before purchasing a property, it’s vital to conduct thorough inspections. This usually includes a building inspection and a pest inspection, which can identify any potential structural issues or pest infestations.

You may also want to consider a strata report if you’re buying an apartment or townhouse. This report provides details about the financial health of the strata scheme and any potential major expenditures.

These inspections may save you from costly repairs down the line. While they might seem like an unnecessary expense when you’re already spending so much, they’re well worth the peace of mind.

10. Don’t Rush Your Decision

Finally, remember that buying your first home is a major decision and it shouldn’t be rushed. Take your time to research, inspect properties, and understand the financial implications of your purchase.

The property market can be unpredictable and sometimes stressful. Don’t be pressured into buying a property that isn’t right for you or exceeds your budget. Remember, it’s better to miss out on a property than to rush into a decision you might regret later.

Always be patient and keep an eye on the market. Your dream home is out there, and careful preparation will help you find it.

Conclusion

Buying your first home is a significant milestone, an exciting journey filled with potential and promise. It is also a journey laden with complexities that, if unprepared, can turn the experience from exhilarating to exasperating. As someone who has navigated this path, my advice is to arm yourself with as much knowledge as possible.

The more informed you are, the better decisions you’ll make and the more rewarding the experience will be. By understanding the Australian home buying landscape – from the First Home Owners Grant to hidden costs and thorough inspections – you’re setting yourself up for a successful and fulfilling home purchase. Be patient, be diligent, and don’t forget to enjoy the process. After all, there’s no place like your first home.

First Home Buyers

First Home Buyers – Extra Costs You Need to Consider

07/08/2023 Jesse Read

The prospect of buying a home is an exhilarating time in your life, but you need to know what you are up against. As an Australian homebuyer, you’re offered a plethora of property choices on the market. While you may be quick to fixate on the advertised purchase price, it is essential to factor in the hidden and extra costs in purchasing the home that you may not have thought about.

As the owner of Read Finance which is a mortgage broking company, I deal with first home buyers consistently. Recognising that there has been a common trend that first home buyers haven’t thought about additional fees they may come across, I’ve compiled a list of these that you need to keep in mind.

Home Loan Fees

Home loan fees, sometimes referred to as mortgage fees, are the costs associated with setting up, maintaining, and closing your home loan. In Australia, these fees can significantly vary depending on the type of loan, the lender, and the loan’s terms and conditions. Here are some of the common home loan fees you might encounter:

Application Fee – This fee is charged by the lender to set up the mortgage. The amount that it could be depends on the lender’s product that you are going with, and can typically range from free to a few hundred dollars. Some places may call this a Mortgage Establishment fee.
Property Valuation – To determine the value of the land and improvements a valuation is normally completed. Depending on the lender’s product you go for this commonly also ranges from being complimentary to a few hundred dollars.
Transfer Duty – There are grants offered by many of the states and territories of Australia that reduce or remove this fee for a first-time home buyer. This is known as Stamp Duty outside of Queensland.
Lenders Mortgage Insurance – Commonly referred to as LMI, this is insurance to protect the bank in case you default on your repayments. It may be a requirement by the lender, especially if you’re borrowing more than 80% of the property valuation.
Mortgage Broker Fee – We do not charge fees for first home buyers at Read Finance unless their circumstances require a considerable amount of more work. Any fees that we charge you will be discussed and provided on a credit quote after our first discussion, this is so we get an idea of your current circumstances. Different mortgage brokers have different fees but are required to provide you with a credit quote

Property Fees

Property fees in Australia encompass a range of costs associated with buying, owning, and selling property. These can include upfront costs like conveyancing fees (for legal services related to transferring ownership) as well as building and pest inspection fees, and if applicable more fees that relate to your first home purchase.

After purchasing a property, homeowners are also responsible for ongoing costs such as council rates, water rates, strata fees (for properties like apartments or townhouses), and home and contents insurance. Additionally, any maintenance or repair costs will also be the responsibility of the homeowner.

Inspections – Building, pest and electrical inspection fees. Depending on the lender’s policies you may be required to have some or all of these completed.
Insurance – Building insurance may be one of the requirements of the lender. Contents insurance is also something you may want to consider.
Legal – A solicitor or conveyancer to go over the legal documents and transfer of ownership.
Utility Costs – One fee that I’ve found that people often forget is the cost of setting up their utilities at the new home. There may be a connection or transfer fee
Council and Water rates – Ongoing rate fees will apply once you have purchased the property.
Strata / Body Corporate – Buying a property on a strata title or an apartment will lead to body corporate fees. This could be substantial fees if there are any major areas of concern.
Building Maintenance – Even if you are not making significant renovations, you should plan for regular property maintenance.

Conclusion

In conclusion, while the prospect of buying a home in Australia is exciting, it is essential to be aware of the hidden and extra costs associated with the purchase. As a prudent homebuyer, you should not solely focus on the advertised purchase price but also take into account various home loan fees and property costs. It’s crucial to consult with a mortgage broker like Read Finance to get a clear understanding of these fees and how they might impact your overall budget.

As you embark on your journey to homeownership, having a comprehensive understanding of these costs will enable you to make informed decisions and better plan your finances. Being financially prepared for all aspects of buying and owning a home will set you up for a successful and enjoyable homeownership experience in Australia.