July 22, 2016
With interest rates still at historical lows, and lenders proving they are hungry for business, now may be a great time to consider your property options.
Buying your first property can be a daunting prospect and, according to a recent survey by Mortgage Choice, four out of five first home buyers do not understand what is required in the property purchase process.
Here’s a few simple steps that first home buyers can take to ensure they feel more confident about buying property.
Find out if you are eligible for government grants or concessions:
In Victoria, there is a 50% stamp duty concession for first home buyers purchasing an established property up to a purchase price of $600,000. There is no First Home Owner Grant (FHOG) when purchasing an established property but there is a $10,000 grant for new properties up to a purchase price of $750,000. Here’s a link to the State Revenue Office website for more information.
Consider purchasing with Lenders Mortgage Insurance (LMI):
As a first home buyer, often the biggest hurdle to get over is the saving of your contribution to the purchase. You often hear the recommended deposit is 20% (so you borrow at a loan to value ratio (LVR) of 80%) of the purchase price plus the purchase-related costs. However, if you consider purchasing above the LVR of 80%, you can do so by having lender’s mortgage insurance (LMI) to pay. LMI insures your lender, protecting them against any loss incurred if you default on your loan and while LMI does not protect you as the borrower, it can potentially help you purchase a property sooner if you have a smaller deposit. It is always important to weigh up your options carefully and consider whether or not it is right to pay LMI and jump in now, or hold off, watch the property market and save a larger deposit.
Buying with others:
If you’re struggling to put aside enough money each month to save a deposit for your first home and committing to the ongoing repayments seem daunting, you could consider pooling your money with others, be it a partner, friend or family member. Combining your funds may not only give you a bigger deposit, it may also increase your borrowing power and help you secure a home loan that meets your needs. If you do decide to go down the path of co-ownership, it’s important that each of you seek your own legal advice and document all the important issues upfront. Everything looks good and everyone is happy entering into a joint arrangement but you need to think about (but not limited to):
- What if one person wants to sell their share?
- What if one partner gets married?
- What if one person stops paying their share of repayments?
- What if there is a default on the mortgage?
Let your mortgage broker do the work for you:
Choosing the right home loan is an extremely important part of the home buying process. A good broker will find a home loan that meets your needs today and in to the future – often saving you a great deal of time and money.
Get loan pre-approval:
Before finding a place to purchase, you need to know if a lender will approve a loan for you. You need to know your borrowing capacity so you can work out your target purchase price, before you start looking for a place to purchase. Contact us to obtain home loan pre-approval.
For more information, contact Peter Ruddock on (03) 9877 6471 or firstname.lastname@example.org