We answer five of the most popular questions every prospective buyer Googles at the beginning of their home-ownership journey.
When you’re looking to break into the property market as a first home owner, there’s plenty to wrap your head around. It’s absolutely understandable that you’ll head over to Google to start your desk research on how to go about buying your first home.
1. What is the First Home Owner Grant?
The First Home Owner Grant is a state based support scheme to help Australian’s buy their first home. It’s a cash grant available to Australians who are buying or building their first residential home in which they live. The grant is funded by the Federal Government and Administered by the relevant state government, which means amounts and process may vary. The FHOG is tax free, helping those trying to break into the market and own their first home sooner.
It’s only available to those buying or building their very first home, so if you’re looking to finally own your own home, it is a terrific financial boost and an incentive to make that bid decision.
During the COVID pandemic the federal government also introduced the HomeBuilder grant which is available to all owner occupiers building their home.
2. When Do I Need Pre-approval?
Technically, no you don’t – but yes you should!
Finance pre-approval provides an indication of how much you may potentially borrow. By nature, finance pre-approval gives you a sign of how much you can afford to borrow, so it’s usually best to get your finance pre-approved before you start a proper search for a home. It’s generally valid for 3 to 6 months although will have some particular conditions attached.
It’s free, and provides you with the confidence to buy or bid with certainty. If you’re planning on buying at auction, a home loan pre-approval is a must!
3. Do I Buy New Off a Plan or Buy an Existing House?
It can be a complex decision and often emotion and preferences play a large role. When buying an existing house you have the comfort of knowing exactly what you’re getting and seeing it in the flesh. You can measure up to see if you will be able to fit that enormous fridge in the kitchen and perhaps even have a sticky-beak at your prospective neighbours, but it may mean you won’t qualify for the First Home Owners Grant.
If you love new things you may be looking at buying off the plan. Outside of the shiny new place, you may be able to take advantage of tax or fee savings in some states, but probably more enticing, is the seven years building guarantee. This protects against building faults for the first 7 years, to be repaired by the builder.
There are inherent risks in buying a property that technically doesn’t exist yet, such as interest rate and market movements, as well as possibly a slightly disparity between expectations and the finished product.
Related post: How do building loans work?
4. How Do I Make an Offer on a House?
Before making an official offer, you may wish to consult a conveyancing lawyer for legal insight around rights and responsibilities.
When you’re making the offer, ensure you consider any finance pre-approval you’ve sought. Be sure to carry out a pest and building inspection and include any conditions of sale – expectations of the seller, subject to loan approval, etc.
If you’re keen on a property, timing can be key. Depending on the market, competition may be hot, so if a property ticks all your boxes and falls within your budget, speed to your offer could be vital.
5. What Is A Guarantor?
Saving for a home deposit can be challenging, particularly if you’re aiming for that 20%. There are low deposit home loan options available like the LJ Hooker Home Loans 5 Star product, but Lender’s Mortgage Insurance (LMI) will be applicable, although you may have an option to capitalise this on top of your home loan.
It’s not uncommon for first home owners to have a guarantor – someone who effectively put up their asset as a guarantee on your behalf.
Guarantors traditionally use their own property (or equity in it) as security to guarantee either the entire loan or a portion of it. They assume responsibility of the loan in case the borrower can’t make repayments, you can’t make repayments, thereby lowering a borrower’s risk in the eyes of the lender.
Typically, this is a family member. If you have saved enough for a 10-20% deposit on the house you’re after. This may help you avoid additional costs such as LMI.
A lending specialist is the best person to guide you on guarantor options when it comes to home loans.
Whilst Google can be a great way to get some foundation knowledge, especially if you’re a little embarrassed to ask questions, buying a house for the first time is an enormous undertaking and you don’t want to digest incorrect information early on.
Be sure to seek out advice of a professional who will take into account your personal circumstances to get the right info.
If you’re interested in finding out more about buying your first home, or just want to start a plan, simply fill in your details below and one of our lending specialists will be in touch for an initial phone or web based chat.
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This article is prepared based on general information. It does not take into account individual financial objectives or needs and is not financial product advice. Credit criteria applies to any loan application. Terms and conditions, fees and charges apply.