Buying your own home has long been the great Australian dream. It’s a big decision because it’s likely to be the biggest financial commitment that you ever make. Standard terms for home loans are 25 to 30 years.
Here’s our 7-point checklist to see if you’re ready to buy your first home.
1) Do you know how much deposit you can provide?
The more deposit you can provide, the less you’ll need to borrow. And the less you borrow, the lower your repayments will be, and the less interest you’ll be charged.
It’s important to understand that most lenders will require you to provide at least a 20% deposit to avoid the cost of lenders’ mortgage insurance (LMI). LMI protects lenders if borrowers default on their home loan repayments.
You can save for your home loan deposit in two main ways:
1) by being disciplined with your spending habits and making sure that you save as much of your regular income as you can, and
2) by accessing the first home owner grant (FHOG) if you’re eligible. In Victoria, the FHOG is $10,000 for eligible first home buyers in Melbourne, and $20,000 for those in regional Victoria. However, the higher FHOG amount in regional Victoria is only available until 30 June 2020.
To be eligible for the FHOG, you and/or your partner must be:
- first home buyers,
- buying a residential home (not an investment property) that’s valued at $750,000 or less and that is less than 5 years old,
- over 18, and
- intending to live in the property for at least 12 months after you buy it.
In addition, at least one of you must be either an Australian citizen or a permanent resident.
You can apply for the FHOG in Victoria online via the State Revenue Office.
2) Do you know how much you can afford to borrow?
How much you can afford to borrow will depend on your lenders’ assessment of your ability to make your regular home loan repayments. This in turn will depend on you and/your partner’s income and spending habits.
A lender or a mortgage broker will be able to give you a good indication of how much you can afford to borrow. In addition, they can potentially arrange a loan pre-approval for you so you know the value of the home you can afford to buy. This can put you in a strong negotiating position when you find a property that you like, and you want to make an offer on it.
3) Do you and/or your partner have a stable income?
It’s important for you and/or your partner to have secure employment and stable income/s so that you’ll be able to afford your regular home loan repayments.
4) Do you have a financial budget in place?
It’s also important that you have a realistic budget of your income and expenses in place (and that you have the discipline to stick to it). This budget should include the cost of your potential home loan repayments. You should aim to eliminate or reduce any unnecessary expenses so that you can comfortably afford to pay off a home loan.
5) Have you factored in additional property purchase costs?
There are additional purchase costs beyond the selling price of a home that you want to buy. For example:
- legal conveyancing costs,
- building and pest inspections,
- loan application fees,
- mortgage registration and transfer fees,
- lenders’ mortgage insurance,
- and ongoing council rates.
However, if you’re a first home buyer, the good news is that you’ll be eligible for a stamp duty exemption or concession in Victoria. This will save you thousands of dollars.
You’ll be eligible for a stamp duty exemption if you’re eligible for the FHOG and the home you’re buying is valued at less than $600,000. You’ll be eligible for a stamp duty concession if the home you’re buying is valued between $600,000 and $750,000.
6) Have you thoroughly researched the property market where you want to buy?
These days, it’s easier than ever before to research the property market online. It’s important that you do. There’s an old saying that three most important factors for choosing a property are location, location and location. Ideally, find a home you like that’s close to where you work and has all the facilities that you need close by.
7) Do you have the time to thoroughly research the home loan market?
The Australian home loan market is highly competitive and there is a huge range of lenders and products. It’s important to understand that even a small difference in home loan interest rates and other home loan features, terms and conditions can make a huge difference to how much you’ll pay over the life of your loan.
But it’s time-consuming and potentially confusing to research the home loan market yourself. That’s where Mortgage Brokers in Melton can help.
How Our Melton Mortgage Brokers Can Help You
At PAT Finance & Mortgage Broking, we can help you to find the right home loan. We’re based in Melton in Melbourne and service nearby areas including Bacchus Marsh, Caroline Springs, Plumpton, Rockbank, Gisborne and Sunbury.
We’ll take the time to understand your individual home loan needs and goals. We work for our clients, not for lenders and we’ll provide you with the best possible mortgage lending advice in Melton and Bacchus Marsh.
Contact us today to book your free home loan assessment to find out how we can help you.