Keep in mind the following information is General Advice and is obviously not personalised for your unique needs, objectives or financial situation. Please get in touch with your advisor before taking any action on the below points so they can advise on the appropriateness of this for you.
The decision to buy your first home is determined by countless hours of planning, analysing, saving, and sacrifices. For most, it is likely to be the most expensive asset they will ever own and the decision to do so does not come lightly.
So, how and where do you start?
Below we outline how to achieve the purchase and, that despite some stress, there is a reward in the process.
Determine your budget
The first step is crucial but also the simplest: analyse your finances, create a budget and identify your limit. Understanding how your expenses affect your income will improve your ability to cut costs and increase savings. From this, you can identify your capacity to pay mortgage repayments and fees and overall, the amount you can borrow for your home loan.
It is advised to save more than what you think you’ll need for a deposit. There are hidden costs including a mortgage application fee, stamp duty, inspection fee, legal costs, and household insurance. Having a buffer in the budget will protect you against any unexpected expenses.
Compare home loans
Never take the first deal offered to you. Comparing home loans isn’t simple and requires time and consideration. Consider the loan term, monthly payments, fees, variable or fixed interest rate, and importantly, the annual percentage rate (APR). The APR is a more appropriate figure when comparing rates as it takes into consideration the fees. In comparison, the interest rate is just the basic interest charged.
Whilst conducting your research, review your budget and choose the most feasible home loan. Once your decision has been made, you can apply for conditional approval on your loan. This means the bank conditionally approves you for a loan of up to a certain amount before you make an offer to buy a house. A conditional approval will usually be for a maximum of three months.
Start house hunting
Now that you have your budget and a conditionally approved home loan, the exciting phase begins. Identify your needs and make a shortlist of suburbs suited to your price range. As this is an investment, conduct market research of growing suburbs. Property investment is a profitable and long-term decision and therefore consider up-and-coming suburbs.
It is important to consider the maintenance cost of a house once you have purchased it. When reviewing a house, consider how much it will cost to make it liveable and whether this aligns with your budget. If renovations are needed, can you afford them?
Buy the house
The purchase of a house can be made either by a private treaty or auction. A private treaty allows you to offer a negotiated price before the purchase. Research neighbouring prices in the area to estimate a negotiated price. Remember, it is not just about how much you offer but also how convenient you make it for the previous owners. For example, reducing the settlement date can encourage the previous owners to seek a deal.
- Follow the settlement process
Once the purchase has been made, you must obtain formal loan approval from your provider. It is also required during this process for a final check to be conducted on the house before the settlement is due. This ensures that everything is in working condition. In some states, a conveyancer is required so check with your state government. A conveyancer solicitor helps with the settlement and title transfer process by ensuring that all legal obligations are met and that their client’s rights are protected.
Once the settlement period is over, the house is yours.
- Move-in and start paying off your mortgage
Keep track of your varied expenses and avoid any unnecessary fees by ensuring your mortgage payments are made. The quicker you pay off your mortgage, the cheaper it is long-term. This is an investment into your future so ensure you are set up in the best way.
Congratulations! You’re a homeowner.
If you would like to apply or review your home loan, please contact your Morrows advisor.