Getting into the property market has never being easy, it's a big financial decision that requires sound budgeting, planning and research. Robert Projeski, a finance and property expert, and the founder of AMO gives some tips to help you get started.
1. Why should first homeowners buy instead of rent?
When you buy your first home you are making a lifelong investment in the solid foundations of bricks and mortar. You have the flexibility to make this property your home or turn it into a future investment property. The equity in your property will grow overtime, meaning each day you own the property your personal wealth grows.
2. What are the first steps to homeowners taking up a mortgage? (should they do their research or talk with a mortgage broker?)
It is always important to do your own research as this is one of the biggest financial decisions you will make in your lifetime. Utilizing the experience of a mortgage expert can give a prospective home buyer great opportunity to obtain advice and possibly reduce your monthly repayments and your loan term up to half.
3. Can a first time homeowner buy a home even if they've had bad credit, and don't have much for a deposit?
Most lenders will require a deposit and there are options available for first time buyers that don’t have a deposit. You will normally need to clearly demonstrate consistent savings over a period of time. You can still buy a home if you have bad credit but you will need a larger deposit or support from a family member or friend.
4. What is a reasonable amount of money to have saved for a deposit?
A general rule is 10% of the property value, but the more you have the better off you will be. Ideally 20% is best to avoid mortgage insurance.
5. Are there still any special grants for first time homeowners?
First homebuyers who purchase new properties will receive up to $15,000 in the form of First Home Owner Grant and could pay no Stamp Duty. Property investors who purchase a new property could receive $5,000.
6. How does a first time homeowner know if they are eligible for a loan?
If they have stability in their job, have saved a deposit and have clear credit, they are in the box seat and ready to speak to a mortgage expert.
7. In addition to mortgage repayments, what other repayments should first time homeowners is aware of?
There are other costs you need to consider. When purchasing a property you could be required to pay mortgage registration, stamp duty Solicitor costs and searches. The stamp duty alone on a $400,000 property is approximately $11,500 for an existing property. Other costs you will need to consider when budgeting for a new home after settlement are, Council and Water rates, insurance and strata levies (if purchasing a unit or townhouse).
8. What should first time homeowners take with them in regards to applying for a loan?
A demonstration of your savings history for the last 6 months, proof of employment e.g. pay slip, group certificate, tax returns, a list of your assets and liabilities and any proof of previous loans that have been paid back to show your good character will hold you in good stead.
9. Anything else first time homeowners should be aware of when it comes to applying and paying of a home loan?
It’s a great time to buy now with low rates. It might be good to consider locking in part if not all of the loan on a low interest rate now. This could help you budget for the next few years. Make sure if you do fix you get a product that allows you to make unlimited repayments even on the fixed portion, this way you will pay down your home loan quicker and achieve home ownership much sooner.