29 May 2007

Buying your first home

Buying your first home can be one of the most exciting yet challenging purchases you’ll ever make, but it’s definitely worth the effort.

So whether you’re looking for an apartment as your first home or your first family home in the suburbs, we are here to help you every step of the way.

Before you go searching for your first dream home it’s important to speak with a lending specialist to ensure you have the necessary information.

There are a number of things you should consider to make the process of buying your first home as simple and easy as possible. So here are the answers to those commonly asked questions.

How much can I borrow?

This is one of the most important things you’ll need to know as it will affect where and what type of home you’ll be able to afford. How much you can borrow will be determined by your income, expenses and current debts as these affect your capacity to repay your home loan. Repayments typically do not exceed 30% of your pre tax income.By calling the office we’ll be able to calculate exactly how much you could borrow in just a few minutes.

How much deposit will I need?

Lenders today offer a broad range of lending products.

Many of the major lenders now offer 100% loans therefore you only need to contribute the purchasing costs.

However, there are now some specialist lenders who do not require you to contribute any deposit and will lend additional funds to cover purchasing costs.

We can let you know if you are eligible for these types of loans.

To avoid having to pay lender’s mortgage insurance (see below) you are normally required to contribute a 20% deposit towards your purchase.

Remember however that with a larger deposit you will either be able to afford to purchase a better home or alternatively have a smaller loan with lower repayments.

Am I eligible for the First Home Owner Grant?

The First Home Owner Grant (FHOG) scheme was introduced on 1 July 2000 to offset the effect of the GST on home ownership. It is a national scheme funded by the States and Territories and administered under their own legislation.

Under the scheme, a one-off grant of up to $7000 is payable to first home owners who satisfy all the eligibility criteria.

The FHOG can provide a real head-start if you’re in the market for your very first home. To find out more about the Grant, or to see if you’re eligible, please visit the website: www.firsthome.gov.au

I’ve heard that even investors can get the FHOG. Is this true?

Depending on the State you live in, you may be eligible for the FHOG even if you own investment properties. For most States, you must have purchased the property after 1 July 2000 and not lived in it.

The eligibility criteria are different for each State so check the website www.firsthome.gov.au to confirm your eligibility or call the office for clarification.

Will I have to pay lender’s mortgage insurance?

Generally if you borrow more than 80% of the property’s value (although it can be higher for some lenders), you will have to pay lender’s mortgage insurance (LMI) adding additional costs to the purchase of a home. This insurance benefits the lender and protects them in the event that you default on the loan. It’s worth calling the office to check whether you will need to pay LMI on your new purchase.

Can family members assist me with the purchase?

A number of lenders accept guarantees from family members in support of a loan application. This can reduce or eliminate the cost of lender’s mortgage insurance and/or increase the amount you can borrow.

What are the additional costs?

Apart from stamp duty and LMI, there are a number of additional expenses you need to take into account when buying a home. Costs include loan application fees, valuation and lender’s legal fees, solicitor/conveyancing fees, transfer and mortgage stamp duty, building/council inspection, pest inspection, home and contents insurance, council and water rates, moving expenses and utility connections.

Some States offer a concession on the payment of stamp duty for first home buyers.

Where can I afford to buy?

Once you’ve worked out how much you can borrow and if you’re eligible for the FHOG, you can work out where you can afford to buy. Most people already have an idea of where they would like to live, however you may discover a few areas you haven’t yet considered by searching the market!

Where can I find homes for sale?

You can always visit real estate agents in the areas you want to buy, however you can save yourself some running around by searching the internet. The internet provides endless opportunities for you to search for that perfect first home. Sites such as www.domain.com.au and www.realestate.com.au provide thousands of listings where you can search by price, area and your special requirements such as property type (house or unit) number of bedrooms/bathrooms and car spaces.

I’ve heard that it is sometimes cheaper to buy, but not move in. Is this true?

For some, the only way of buying a home is to first rent it out. This is because of the tax benefits associated with investment properties. Negative gearing creates a cost saving because you can claim a tax deduction for the difference between the rent received and expenses such as interest, rates and maintenance. This may be just the boost you need to get into the home market, especially if you can live with your parents rent-free for a while. Please note that if you do this you may not be eligible for the FHOG on this property. You need to weigh up the pro’s and con’s as sometimes the benefits outweigh the FHOG. Our lending specialists will be able to help you work this out.

Which loan is the most appropriate for me?

Finally you need to determine the home loan that is right for you. Regardless of your needs and circumstances, there are a range of loans to suit. If you call the office we’ll discuss your unique circumstances and help select the most suitable loan for your first home or investment property by using our mortgage selection process. You can use our calculators to find what’s the best loan for you.

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