- Home Loan Calculators
- How Much Can I Borrow?
- Refinance Your Home Loan
- Fixed Rate Home Loans
- Interest Only Home Loans
- Variable Rate Home Loans
- Fixed vs Variable Interest
- Debt Consolidation
- Lenders Mortgage Insurance
- Home Equity Loans
- Interest Rates Information
- Mortgage Brokers
- First Home Buyers
- First Home Buyer Grant
- Stamp Duty
- Investing In Property
- What To Consider Before Buying
- Finance Tips For Renovators
- Pre-Renovation Checklist
- Renovating vs Buying a New Home
- Home Loans Comparison Guide
- Home Loan Application Checklist
- 10 Mortgage Repayment Tips
- About Home Loans
- Home Loan Lenders
- No Deposit Home Loans
First Home Buyers
Purchasing your first home can be exciting and overwhelming in equal measures. Between saving for a deposit, researching different types of home loans and deciding where to buy, there are a lot of things to do.
Here we’ve laid out what you need to know when it comes to finding the property of your dreams, and the right home loan to go with it.
Buying a home – where do I start?
One of the most important first steps when you’re looking to buy a home is knowing what you can afford. Use iSelect’s Borrowing Power Calculator to work out an approximate figure based on your income, regular expenses and how many dependants you have.
How much deposit do I need?
Another important first step in the home-buying process is saving for a deposit. Generally, the more money you’re able to put down the better, but you may be able to fast-track your dreams of home ownership through a low deposit home loan.
- From five to 15 per cent deposit. You may be able to get a home loan with five per cent of the property price as your deposit. However, your lender will still expect you to be able to cover stamp duty and other costs, and you may have to undertake Lenders Mortgage Insurance (LMI), which protects the lender if you default on the loan.
- At least 20 per cent deposit. The higher your deposit, the better – aiming for 20 per cent is a good start, but you may need up to 35 per cent to cover additional fees in order for you to avoid paying LMI. Having a bigger deposit could potentially also put you in a better position to negotiate with your lender and open up a range of low interest rate home loans.
Alternatively, you may be able to purchase a property with no deposit and without having to pay LMI if you have someone to act as guarantor on your home loan. In this case, your guarantor would be liable for an agreed, guaranteed amount in the event that you default on the loan.
However, the guarantor would need to have sufficient equity in their home loan so they don’t incur LMI when supporting the guarantee. Learn more about no deposit home loans.
Will I have to pay stamp duty?
Stamp duty, sometimes called land transfer duty, is the cost of transferring land from one individual or entity to another in Australia.
Most people are required to pay stamp duty – although there are there are certain concessions and exemptions. Check out our guide to stamp duty for more information.
Home loan pre-approval
At some point in your home-buying journey you’ll have to make an application to a lender. It’s highly recommended to seek pre-approval if you’re planning to make a bid on a property at auction.
There are two types of pre-approval:
- Validated pre-approval. This means the credit assessor has validated your information and sets out any conditions to the approval before it gets unconditionally approved.
- Non validated pre-approval. This means the lender has simply acknowledged the application but is yet to assess it. It does not mean the application has been pre-approved.
Both validated and non-validated pre-approval require a valuation to be performed, but this generally won’t occur until the purchase has occurred. Bear in mind that the valuation could come in lower than the purchase price. If this case, you would need to find a larger deposit or the loan to value ratio (LVR) may increase, which might mean you are required to pay LMI.
You may be able to ask your lender to undertake an ‘upfront’ valuation. This will provide more security to you as a borrower, as you will know what the value of the property is and the value that the lender will accept.
How does the First Home Owner Grant work?
The First Home Owner Grant (FHOG) is a one-off, tax-free grant paid to Australian citizens or permanent residents who are buying their first home in Australia. It can be very useful in covering some of the cost of stamp duty.
Although a national scheme, the FHOG is funded by state and territory governments. The requirements, payments and conditions are therefore slightly different based on where you are buying.
Each state and territory has their own cap on the maximum house price for FHOG eligibility. You can find specific information relevant to your state or territory on the government’s first home buyers’ site or by viewing the First Home Owners Grant page on the iSelect website.
How do I compare home loans?
Some basic tips for comparing home loans include:
• Review the key fact sheets provided by lenders, which will tell you how much you will pay over the life of the loan, including fees, charges and repayment amounts.
• Investigate the different home loan options and features for structuring a home loan.
• Decide if you want to pay fixed or variable interest.
• Compare the interest rates on offer.
• Check the comparison rates, which include the interest rate and fees combined to help you identify the true cost of the loan.
• Look at the monthly repayments and loan features.
They’ll use their valuable experience to help you find the right loan for your unique situation. They also help you with all the paperwork and answer any questions you may have. Meanwhile, having them do the legwork for you gives you more time to find your dream home.
Buying your first home is easier with the right support. Call 13 19 20 to speak to an iSelect broker today.