Common mistakes when buying your first home

First home buyers can now purchase a property with as little as 5 percent deposit without paying lenders’ mortgage insurance, thanks to the government’s expanded First Home Guarantee Scheme, effective from October 1. It’s expected that 70,000 first home buyers will benefit from the scheme in its first year.

Unpacking the Australian Government 5% Deposit Scheme

The scheme, formerly known as the Home Guarantee Scheme and now branded the Australian Government 5% Deposit Scheme, aims to help more Australians buy their first home sooner.

Eligible first-time buyers on all income levels can purchase a home with a 5% deposit, without paying costly lenders’ mortgage insurance (LMI). The government acts as a guarantor for 15% of the home loan.

Price caps on eligible properties have been lifted, and there is no limit on the number of people who can apply. First home buyers in Sydney, for example, could purchase a $1.5 million home with a $75,000 deposit. A $950,000 home in Melbourne would require a $47,500 deposit.

Common Mistakes When Buying Your First Home

Here are some common mistakes to be aware of:

1. Underestimating Your Purchasing Costs

Saving your deposit is just one piece of the puzzle. There are also other upfront costs to consider, including:

• Stamp/transfer duty

• Transfer fees

• Building and pest inspections

• Legal or conveyancing fees

• Loan establishment fees

• Moving costs

Also, there are ongoing costs such as council rates, water and utility fees, body corporate fees (for apartments), maintenance, and insurance. All of these need to be factored into your budget.

2. Being Led by Emotion, Not Reason

It’s easy to fall in love with a property’s appearance and possibly exceed your budget or overlook its flaws. Always take a critical approach when inspecting properties and ensure the property meets your key needs.

3. Not Getting Pre-Approval on Your Finance

Pre-approval is an indication of how much a lender is likely to lend you, based on an initial assessment of your income, expenses, assets, and liabilities. Pre-approval gives you a clear understanding of your spending limit, helps narrow your property search, and strengthens your negotiating position with sellers. This will put you in a better position to make an offer or bid at auction with confidence.

Pre-approval for a home loan usually lasts for 90 days.

4. Skipping the Building and Pest Inspection

You may be tempted to skip a building and pest inspection to save money, but it could end up costing you thousands in the long run. A building and pest inspection ensures the property is free from structural problems or pests like termites, or issues such as asbestos or rising damp. Make sure you arrange the inspection before signing the contract of sale.

Ready to get started?

Buying your first home is exciting, but it’s important to have experts on your team steering you in the right direction.

As your finance broker, we’ll run through your current financial situation and purchasing goals, then find you the right home loan for your specific needs.

We can also explain whether you’re eligible for any first home buyer government incentives that could help you achieve your goals sooner.

Please contact us today to learn how we can help.