| first home buyer | 3 Mar 2008 11:00 PM |
| So… you are in the market to purchase your first home by Vicky Edema | |
Many first home buyers are both excited and daunted by the prospect of purchasing their first home property in Australia. Like everything else though, it is not such a difficult process provided you do your research and make use of professional and experienced people along the way. Purchasing your first home will be your biggest financial transaction to date – it’s much more important that purchasing that new car, plasma TV or fridge so retain professionals –especially a solicitor to make sure that the contracts you are signing are not going to leave you exposed if something goes wrong. As a purchaser the “buyer beware” principle applies and while a vendor can not misrepresent any aspect of the property it is your responsibility to satisfy yourself that what you are purchasing is as described in the contract.
Before starting the first home buyer process it is advisable to 1. research the area / suburb where you are intending to buy your first home. Are schools, shopping centre and other facilities near by? Are you within the “zone” for a particular secondary school you like? Is public transport close by? What are Council’s plans for the area – improvements proposed, road widening plans etc.
2. Check out the internet and look at sites that provide information on suburbs and the trends expected in property values there. For a small cost of around $50 (insignificant when you are likely to be paying in excess of $250,000 for a property in Sydney or any other capital city in Australia) you can get a good report on the suburb, average prices, your particular property if you have identified one, expected capital growth. Even though there are more important things than capital growth when you are looking for your first home it is nevertheless a good idea to take some of the emotion out of the exercise and make sure that you are buying in a growth area.
3. Check out the internet for mortgage calculator tools and run some numbers to find out how much you can borrow. There are many different mortgage calculators available – one that is very worthwhile taking a look at is the 100% offset mortgage calculator. You can save a significant amount of interest over the term of your loan if you are in a position to have $5000 or $10,000 on deposit in an offset account. Perhaps your parents or grandparents may be able to help with this. With a 100% offset mortgage you only pay interest on the difference between the loan balance and the offset account balance. E.g. Loan Balance $200,000. 100% Offset Account Balance $10,000. Interest is payable on $190,000 only.
4. Check out the internet to see if any mortgage managers or lenders have a first home buyer club. Often there are investor clubs and first home buyer clubs that offer First Home Buyer Guides, tips and information regarding State stamp duty concessions and the First Home Owner Grant in Australia. Some First Home Buyer Clubs also provide free residential reports as noted in 2 above. Some mortgage managers also offer a First Home Buyer promotional package which can include white goods and other kitchenware that can help you to set up in your first home.
5. Apply for an approval in principle for your mortgage finance. Most mortgage managers and lenders will provide an approval in principle subject to valuation. If you are bidding at auction for your first home and have a good idea of values you need not necessarily obtain a valuation before you exchange – this way you avoid the cost until you have secured the property. If you are unsuccessful at auction, then you simply notify your mortgage manager or lender. The approval in principle from your mortgage manager or lender should still stand from a borrowing capacity and credit worthiness point of view. Once you have identified another property let your mortgage manager or lender know and restart the process.
6. Once you have identified a property and decide you will put in an offer or bid at a forthcoming auction, then as noted earlier before doing so, you should retain a solicitor to check your contract of purchase. He may recommend you obtain a pest report, particularly if the first home you are purchasing is an existing property as opposed to a new unit. Again the costs involved when compared to the purchase price are insignificant and it is always wise to make sure that you have covered off all aspects of your first home purchase properly.
7. You are ready to exchange. In Australia the settlement process once you have exchanged contracts usually takes about 4 – 6 weeks. Once the legal documentation is completed you can settle, pick up your house keys and move in to your first home!
Before starting the first home buyer process it is advisable to 1. research the area / suburb where you are intending to buy your first home. Are schools, shopping centre and other facilities near by? Are you within the “zone” for a particular secondary school you like? Is public transport close by? What are Council’s plans for the area – improvements proposed, road widening plans etc.
2. Check out the internet and look at sites that provide information on suburbs and the trends expected in property values there. For a small cost of around $50 (insignificant when you are likely to be paying in excess of $250,000 for a property in Sydney or any other capital city in Australia) you can get a good report on the suburb, average prices, your particular property if you have identified one, expected capital growth. Even though there are more important things than capital growth when you are looking for your first home it is nevertheless a good idea to take some of the emotion out of the exercise and make sure that you are buying in a growth area.
3. Check out the internet for mortgage calculator tools and run some numbers to find out how much you can borrow. There are many different mortgage calculators available – one that is very worthwhile taking a look at is the 100% offset mortgage calculator. You can save a significant amount of interest over the term of your loan if you are in a position to have $5000 or $10,000 on deposit in an offset account. Perhaps your parents or grandparents may be able to help with this. With a 100% offset mortgage you only pay interest on the difference between the loan balance and the offset account balance. E.g. Loan Balance $200,000. 100% Offset Account Balance $10,000. Interest is payable on $190,000 only.
4. Check out the internet to see if any mortgage managers or lenders have a first home buyer club. Often there are investor clubs and first home buyer clubs that offer First Home Buyer Guides, tips and information regarding State stamp duty concessions and the First Home Owner Grant in Australia. Some First Home Buyer Clubs also provide free residential reports as noted in 2 above. Some mortgage managers also offer a First Home Buyer promotional package which can include white goods and other kitchenware that can help you to set up in your first home.
5. Apply for an approval in principle for your mortgage finance. Most mortgage managers and lenders will provide an approval in principle subject to valuation. If you are bidding at auction for your first home and have a good idea of values you need not necessarily obtain a valuation before you exchange – this way you avoid the cost until you have secured the property. If you are unsuccessful at auction, then you simply notify your mortgage manager or lender. The approval in principle from your mortgage manager or lender should still stand from a borrowing capacity and credit worthiness point of view. Once you have identified another property let your mortgage manager or lender know and restart the process.
6. Once you have identified a property and decide you will put in an offer or bid at a forthcoming auction, then as noted earlier before doing so, you should retain a solicitor to check your contract of purchase. He may recommend you obtain a pest report, particularly if the first home you are purchasing is an existing property as opposed to a new unit. Again the costs involved when compared to the purchase price are insignificant and it is always wise to make sure that you have covered off all aspects of your first home purchase properly.
7. You are ready to exchange. In Australia the settlement process once you have exchanged contracts usually takes about 4 – 6 weeks. Once the legal documentation is completed you can settle, pick up your house keys and move in to your first home!
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