- Posted 20 Jul
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Buying a first home is an exciting process and is a reward for all the hard work you’ve done in saving and planning.
The average Australian first home buyer is 28, according to a recent survey conducted by homeloans.com.au. Most respondents saved for over a year for their deposit, with nearly 40 per cent saving for more than two years.
They were typically able to save between 5 and 9 per cent of the home price, but in many cases this wasn’t enough to lead to a successful offer.
This survey shows that home ownership is becoming tougher for young buyers due to Australia’s ever increasing real estate prices.
Here are some of the financial steps you’ll need to be a successful first home owner.
Create a consistent savings plan
In the survey more than 40 per cent of respondents said they were willing to make spending sacrifices to help them purchase a first home. TV subscriptions, lunchtime purchases, and going out for dinner and drinks were among the items people cut back on in order to save regularly.
Australia’s first home owners grant (FHOG) offers up to $10,000 towards purchasing or building a new home. First home buyers purchasing an established house can qualify for up to $3,000 under FHOG; however, this provision may be vanishing soon and varies from state to state.
First home buyers also qualify for other potential incentives to help ease the home buying process. One example is a stamp duty discount of 50 per cent for homes under $600,000 in Victoria.
It really pays to research your options and look for any savings you may qualify for within your state or territory.
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.
Australian Credit and Finance has years of experience helping first home buyers achieve their dreams. Contact our home loan experts for more information.