What do first home buyers need to know?

October 11, 2017
Carlee Horsell

Purchasing your first home can be an overwhelming and daunting proposition and you may have plenty of questions you want to ask but aren’t quite sure where to go for help.

 

A mortgage broker is a great place to start as they will take the time to discuss your individual needs and answer any questions you may have. As a brief guide though, most first home buyers entering the property market have the following as their top questions:

  • How much can I borrow?

  • How much deposit do I need?

  • Am I eligible for any First Home Owner concessions?

  • Can my parents be guarantor?

  • What is LMI?

 

How much can I borrow?

How much you can borrow will depend very much on your personal circumstances - how much income you receive, what sort of income you receive, what other liabilities you have and even where you are looking to purchase. Online calculators are good as a guide but to get an accurate picture it is essential to speak with an expert who can take all of your circumstances into consideration.

 

How much deposit do I need?

Most lenders will require you to have saved at least 5% of the purchase price as a deposit however the greater deposit you have, the better off you are when purchasing a home. Having a larger deposit means you avoid lender’s mortgage insurance which can cost you thousands of dollars and you are in a much better position to gain approval fast. You should also be aware that in addition to a deposit you will also need to save money for other purchase related costs including stamp duty, conveyancing fees, pest and building inspections and other government fees and charges.

 

Am I eligible for First Home Owner concessions?

First Home Owner concessions vary between states but you may be eligible for some concessions if you have never owned a property before. Further information on eligibility criteria you should check with your state revenue office. You can also lodge your application with your mortgage broker when you do your loan application to save time.

Can my parents be guarantor?

With house prices rising, it is becoming more and more common for parents to help their children achieve their home buying goals. One option that can be used is for parents to use the equity in their own property and become a guarantor for their children. This essentially means that the parents offer their own property as additional security for the purchase. Although this option can help to get into the property market sooner and eliminate the need for a large deposit, it also increases the risks involved in purchasing a property and parents should seek independent financial advice before agreeing to be a guarantor.

 

What is LMI?

If you have less than a 20% deposit plus associated purchase costs, you will be required to pay lender’s mortgage insurance or LMI. This is a one-off cost that protects the lender and not the borrower and can usually be capitalised into the loan amount. Premiums can run into the thousands and depend on a number of different factors including property value, location, purpose and deposit amount.

 

For any other questions or to find out your borrowing capacity, contact me on 0499 051422 to make an appointment





Posted in: First home buyers

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