Getting a Home Loan in Australia if you're living overs...
29 Nov 2023
Purchasing your first home is one of life’s greatest achievements, yet with it comes a significant initial financial expense. It may have taken you near a decade to save enough to afford a significant property deposit, yet deposit aside, there are plenty of other costs to consider besides price when navigating the property market. Before you begin your property hunt, it’s important to factor in both upfront and ongoing costs associated with the purchase of your first home to save yourself potential financial pressures in the future.
The most significant initial upfront cost for first home buyers is the deposit, however you don’t have to do it all on your own. As a first home buyer, there are a number of State and Federal government financial incentives available to help you achieve the great Australian dream. Typically first home buyers are eligible for the First Home Owner Grant (FHOG) offered by relevant State and Territory governments. Each State and Territory has specific conditions to receiving the FHOG, therefore it is important to check the relevant terms and conditions before applying in your desired location.
The Federal government will also provide support for eligible first home buyers through the Home Guarantee Scheme (HGS) in order for eligible home buyers to purchase a home sooner. Under the HGS, first home buyers may be eligible to receive support through either the First Home Guarantee (FHBG), Regional First Home Buyer Guarantee (RFHBG) and Family Home Guarantee (FHG). Similar to the FHOG offered by States and Territories, each financial support option provided by the Federal government requires first home buyers to meet certain eligibility criteria, which can be found here.
Lenders Mortgage Insurance (LMI) is charged by lenders if the homebuyer is borrowing more than 80% of the value of the property. LMI is a cost paid by the borrower which protects the lender if the borrower defaults on the loan.
The reason for this is because borrowers with deposits over 20% are perceived by lenders to be less likely to default on a loan. That 20% deposit is viewed as a buffer, large enough so that if there was a fall in the value of the property, the lender would be protected as they could recover the amount owed to them if the borrower defaults.
The cost of LMI can depend on the insurance provider and the size of your deposit. You can try using our LMI Calculator to get an estimate.
Hiring a solicitor or conveyancer is a must when purchasing a property, particularly your first home. A solicitor or conveyancer will prepare all the required documentation and be your point of call to negotiate with the bank and the vendor you’re buying the property from. There are also costs around registering the land and mortgage transfers.
The main difference between a solicitor and a conveyancer is their form of expertise and in turn, the price of their service. A qualified conveyancer is limited to preparing legal documents and giving legal advice in regards to property transactions, whereas a solicitor can provide a wider range of legal advice.
A building and pest inspection or strata report inspection is strongly advised no matter the visual condition of the home - as the saying goes, looks can be deceiving!
These reports will provide information on the structural integrity of the building and inform you of any problems that may require immediate repair. For a unit block, a strata report inspection will inform you of previous building works including future plans.
Stamp duty is more often than not a hefty bill when purchasing a property. In similar fashion to the various grants available for first home buyers, the cost of stamp duty varies from state to state.
To see just how much you may be required to pay in stamp duty, be sure to check out our stamp duty calculator to help wrap your head around yet another figure.
Once you have a home loan, there are several home loan fees that may be charged upfront. Lenders try to make their fees and charges transparent for borrowers, but each lender might call their fees something different and some fees might still catch you by surprise.
To keep things short and sweet, some of the main fees involved in the first home buying process include loan establishment fees, valuation fees and settlement fees.
For a comprehensive list of all the fees that are associated with the purchase of a new home, as well as fees attached to a home loan, check out our complete guide on home loan fees.
As new homeowners, it's important to keep both your home and the the items in it safe and secure. Your home is a valuable asset, you will need to protect it by having it insured. The price of the insurance varies as you will generally have the option of choosing between home insurance, contents insurance, or both.
It’s worth shopping around to compare different companies. Depending on where your new home is, insurance may be more important. Factors like weather, storms or bushfires can all mean higher premiums and costs of insurance, so make sure your home and contents package suits you and your home.
When you buy a property you’re required to pay the vendor the remaining yearly or quarterly rates, such as water and land. These will begin from the date of settlement and will be individual to the property and area.
If you’ve purchased an apartment, unit or townhouse, you’ll need to pay body corporate or strata fees. These cover the maintenance of shared areas in and around the property, building insurance and administration fees.
As a homeowner, you’ll also need to budget for regular maintenance and repairs on your property. Hopefully, these expenses won’t happen too regularly but you do need to budget for them as they can quickly become very expensive.
Maintenance can include cosmetic repairs such as painting, landscaping or basic renovations as well as heavier repairs such as upgrading fixtures and fittings.
Arguably the most important ongoing costs associated with purchasing your first home include mortgage repayments. Your chosen payment frequency will determine the size of your repayments and the time it takes to repay your loan. This can be used as a strategy to potentially save you thousands in interest expenses over the life of your loan. Essentially, the more frequently you make mortgage repayments, the faster you reduce the principal, saving you interest.
By developing an understanding of both the upfront and ongoings costs of purchasing your first home, it's easy to see that a property purchase goes well beyond simply that of purchase price. Importantly, factoring in your current financial position, income and expenses before making the decision to jump into the property market may result in you developing a greater understanding of whether you are in a position to purchase now or whether you should wait for a time in the near future.
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