|Know the true costs.
Knowing the true costs of home ownership is key to a successful home buying experience. Understanding home loans is part of the process, but you’ll need to pay for more than just the property you are bidding on.
Here are some of the additional costs you need to be prepared for:
- Home loan application fees – Fees vary depending on the lender, but you may spend up to $1,000 to apply for a home loan.
- Stamp duty – A government tax based on the home’s purchase price, the stamp duty must be paid before settlement. As in the example above, first home buyers may be eligible for discounts, but this varies depending on the state.
- Lenders mortgage insurance (LMI) – This insurance protects the lender against loss if you default on your loan. Unless you pay 20 per cent down on a property you’ll need to pay for LMI.
- Mortgage registration – This fee covers registering the title for your property. Plan to pay up to $125 to the Land Titles Office.
- Legal fees – Feeds paid to your solicitor for doing the legal work involved in the property transfer.
- Insurance – You’ll be required to carry a building insurance property to protect your lender’s investment.
- Inspections – Plan to pay for a thorough building inspection and an inspection to search for pest damage before purchasing the home. These inspections will give you peace of mind and alert you to any problems with building regulations.
| Financial Tips for first home buyers
- Consider a Mortgage Broker – A mortgage broker is there to help you find the right home loan for your situation. Since this is your first home loan, a Loans & Mortgages mortage broker can show you the ways and explain all the features available.
- Plan Your Budget – There is nothing more important than planning a workable budget and s buying your first home, as well as continuing with a revised edition once you have successfully pocketed the keys. It will be through sticking to a budget that you will get to understand how much you will be able to afford each week once you get down to organising your home loan.
- Know your limitations. Whatever you do, do not buy what you cant afford. It is easy to convince yourself that you will only have to struggle for a couple of years and then everything will be alright once your promotion comes along. What if something were to happen in the meantime, or the promotion never came. You could stand to lose everything and you will not have the benefit of the First Home Owner Grant and any other first home buyer incentives the second time around.
- Save the biggest deposit that you can put together. The saving of a deposit will help you in two ways. First it will show your potential lender that you can exercise financial discipline over a period of time and secondly the bigger the deposit the larger the equity you have in the property right from the start. This means you will pay less interest. One of the best ways to do may be to take out a high interest savings account.
- Apply for the First Home Owner Grant early. The most appropriate time to apply for the First Home Owner Grant is at the same time you apply for your home loan. You can lodge your grant application through most lenders, if they are an authorised agent and able to receive it. If you do this it will be processed faster than if you had sent it directly to your relevant State or Territory Revenue Office, the government authority that administers it. In most cases if you do this the grant will be processed by the time of settlement or if you are building, by the time your lender will be paying over the first scheduled construction loan payment If you miss out you will still have 12 months from settlement, or from the completion of the building, to do so. Even then, in special circumstances, the commissioner can extend this time limit further.
- Rid yourself of excess debt. Do not make the mistake of applying for your first home loan while you are carrying excessive debt. Do away with any credit cards you do not really need, finish off you car payments, even sell it if you have to and buy a cheaper car. Make your home loan your top priority. It is also a good idea to factor in any potential interest rate increases to see where it would leave you.
- Be a cynical buyer. Do not necessarily believe all you are told. Make sure you carry out thorough building and pest inspections and find out what prices similar houses are selling for in the same locality. If you do your research properly you should be pretty right.
- Make certain you receive all that you are eligible to receive. The various state and territory governments also offer their own incentives to first home buyers in the way of grants of their own, as well as waiving or giving generous concessions off the costs of stamp duty imposts. Make sure you know what is available in the locality you are buying your first home.