We know that finding and buying your first home is an exciting time – but it’s also a big commitment and one of the biggest purchases you’ll make, so understanding the steps you need to take is important.

We’re joined by AMP Workplace Education Manager Jess Arambulo and Senior Home Loan Specialist Aarti Joshi to answer some of the general queries you may have about buying your first home, and to talk through stamp duty, conveyancing fees and other costs involved when purchasing a new home.

Your first home buyer questions answered | Q&AMP

Video transcript

JESS: Welcome to the Q&AMP Property Outlook series. I’m Jess Arambulo.

We're here today to talk about the queries you may have about purchasing your first home. I'm speaking to Aarti Joshi, Senior Home Loan Specialist at AMP Bank to find out more.

First of all, Aarti, thank you for joining me today.

AARTI: It's nice to be here Jess, thank you for having me.

JESS: Aarti, let’s start with some of the things we need to think about when it comes to buying our first home.

AARTI: The first thing to think about when you are purchasing a property is how much deposit you have. Usually, you need a minimum of 10% of the purchase price. You also need to calculate how much you can afford to repay comfortably – using an online calculator may help.

Next, think about where you want to buy the property. Location is important because it will tell you the price range you're looking at. Every suburb has a different price range. Knowing what type of property you're purchasing is important too. Whether you are doing construction, purchasing land or purchasing an existing dwelling. Those things will tell you whether you are eligible for a government grant.

For example, you may be eligible for the first home owner grant, depending on if you're purchasing a brand new property or an existing dwelling.

Knowing how much you can borrow is another big one, we check your income and liabilities which include credit cards, car loans and all other debts. Based on all that information, we can tell you how much you are eligible to borrow for the purchase.

Considering other costs is important too. As a part of the home buying process, you should keep those in mind – such as stamp duty, conveyancing and building inspection fees.

Looking at all the above will help you go into your property search with a realistic lens.

JESS: And how much should you already have to contribute towards your own property?

AARTI: Ideally, you should save as much as you can for the purchase of the property. Many lenders require a minimum deposit of 10%, but aiming for 20% is a good idea. The maximum amount you can borrow is 90% of the purchase price.

JESS: What are some other considerations for the buyer that people may not be aware of?

AARTI: One thing I think people may not be aware of is Lenders Mortgage Insurance, known as LMI. When you borrow more than 80% of the purchase price, you need to pay mortgage insurance – and the amount changes based on your purchase price and the loan amount.

Also, it can be helpful to get a pre-approval for your loan. Pre-approval means your lender has agreed in principle to pay you a certain amount of money. While this is not a compulsory step for the borrower, it does give you a maximum budget to work with when you are purchasing a property.

We encourage you to get pre-approval before going to any auction or doing any bidding. When you are buying a home either by auction or normal sale, it's safer to have your pre-approval locked in.

If you're buying a home at normal sale, you may get up to 14 days cooling off period, which means you can change your mind without losing your deposit.

In this extra time, you can get your pre-approval organised if you haven't already.

However, if you're buying at auction, there is no cooling off period. If you're successful at auction, you need to pay a 10% deposit at the time unless agreed otherwise prior to the auction. So it's better to have your pre approval ready, otherwise you will risk forfeiting your deposit.

JESS: What government incentives are there for first home buyers?

AARTI: Well, the first home owner grant varies across different states and territories, and it can go up to $20,000 for some home buyers in Victoria and Tasmania. Some states offer exemptions or reductions on stamp duty and other fees depending on different state schemes. Your mortgage broker or AMP home loan specialist can tell you more about this.

JESS: Aarti, can you give us an overview of charges that are incurred by first home buyers? 

AARTI: Yes, of course. The main charge is your deposit, closely followed by stamp duty. Then there is a solicitor or conveyancing fee. Every conveyancer or solicitor has different fees and charges. And the payment is up to the client.

The land registration fee is usually included in the conveyancing fee, as well as the offer, execution and lodgement of the legal documents as part of sale. The buyer may want to consider building and pest inspections too.

JESS: Finally Aarti, how do the charges for buying a home differ for purchasing a home in each state or territory?

AARTI: The fees vary state to state. Stamp duty is a big expense and each state charges it in a different way. It depends on the purchase price and the property value and the state you are buying in. Plus, it depends on whether you're purchasing a brand new property or an existing dwelling. There is a fee at the time of the purchase called title registration fee which varies state by state.

JESS: Thanks Aarti, some great insights there.

Summary :

  1. For first home buyers it’s important to know how much you can afford to borrow - and that many lenders require at least 10% deposit.
  2. You also need to consider the implications of purchasing a property and how it affects your financial situation.
  3. There may be additional benefits on offer to you from your state or territory government.
  4. Be aware of other costs involved in buying a home, have a clear plan for how you’ll make repayments, and seek advice if you’re unsure.

Please remember this video hasn't taken your circumstances into account. It's important to consider your circumstances before deciding what's right for you.

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