9 tips for first home buyers

There's a lot to get your head around as a first home buyer, particularly when it comes to saving money in the short and long term.

Did you know the majority of first home buyers in Australia are taking just under four years to save for a deposit on a home loan1?

If you’re thinking about, or aren’t far away from putting some money down on your first home, we look at some of the statistics and major pointers you’ll want to know upfront.

The current state of affairs

According to research on first home buyers in Australia2:

Pointers for first-timers

1. Determine the costs

It’s not just the purchase price of the property you’ll need to budget for. There will be added costs such as stamp duty, legal fees and interest charges, which also have the potential to rise and fall.

For a breakdown of the upfront and ongoing costs you’re likely to come across, check out our article - How much does it really cost to buy property?

2. Set a workable budget

Lenders generally ask for a minimum deposit of between 10% and 20%. Others may offer you finance without this if a family member pays the deposit, signs as guarantor or goes in as a co-borrower.

ASIC says aiming for a deposit of 20% or more of the purchase price, plus enough to cover added costs, is a good goal to have3.

3. Look into your credit history

A bad credit report could affect your ability to get approval on a loan. For information check out our article - How your credit history could impact tomorrow’s borrowing plans.

4. Research the areas you’re keen on

To ensure you buy something you love and for the right price, things to investigate include:

  • property prices in the suburbs you’re interested in
  • the distance from family, friends and work
  • rental returns and vacancy rates if you’re renting your property out
  • off-street parking and local amenities, such as schools, shops and transport
  • whether you’ll need to renovate and if you have the extra funds available to do this
  • price growth potential in the suburbs you’ve shortlisted for capital gains purposes
  • proposed developments in the area in case they impact the value of your property.

5. Explore government assistance options

The First Home Owner Grant is a national scheme. If you’re unsure about eligibility, contact your state revenue office and be sure you apply with enough time.

Certain state and territory governments also offer additional incentives to first home buyers, some which involve stamp duty concessions, so take some time to research these too.

6. Investigate home loans

Depending on whether you’re after a basic package or one with added features, home loans can vary a lot when it comes to interest rates and fees. For a rundown, see our list of common types of home loans.

You should also consider the potential advantages of various home loan features, which may allow you to make extra repayments, redraw funds, or use an offset account which can reduce the interest payable.

Remember, it’s worth shopping around to find the best deal and also asking your lender if they can do better than the rate that is being advertised.

7. Familiarise yourself with the comparison rate

When you see a home loan advertised, you’ll see two rates displayed—the interest rate and the comparison rate, which incorporates the annual interest rate as well as most upfront and ongoing fees.

Some home loans, with lower interest rates, are laden with fees, so while they appear cheap, they aren’t. The comparison rate reveals this and enables you to compare loans more accurately.

8. Get your finances in order

It’s a good idea to have your loan pre-approved so you know exactly what you can borrow. You’ll also need formal approval closer to purchasing and to have your deposit ready, or you may miss out.

As part of the process your lender will advise if lender’s mortgage insurance is required, although this is usually only the case when you’re borrowing over 80% of the purchase price.

9. Don’t forgo inspection reports

These inspections will alert you to structural problems or defects that may not be visible to the eye—asbestos, termites, electrical, ventilation and serious plumbing faults.

Meanwhile, a strata report, if you’re buying a townhouse or apartment, can tell you whether the property is well run, well maintained and adequately financed.

Further assistance

For further tips, check out our page - How can I maintain my lifestyle and own my property sooner?

Our online education module - Buying a home might also give you some ideas.

Meanwhile, if you’d like to talk to an AMP home loan specialist, you can request a call back via our online tool.

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© AMP Life Limited. This provides general information and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, AMP does not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, AMP does not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.