The Basics

Buying a home may be easier than you  think.

 

If you're like most people when we first speak with them, the prospect of buying a first home can seem overwhelming. Fraught with the unknown and seemingly impossible to achieve - many simply resign themselves to the fact that it is too far away to even contemplate.​

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In reality, with the help of someone like First Home Centre, buying a first home can be done quicker, affordably and in less time than you think.

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Happy reading! 

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Oh, and p.s. It's never too early to pick up the phone and give us a call. 

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#1. Is now the right time to buy?

 

Property makes up 60% of the entire wealth for for middle and high wealth Australians.

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Property is now 60X more valuable now than in 1970 and there are signs that the trend will stop given the shortage of land and growing population.

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Since 1970, property prices have more than doubled every decade.

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                               1970                                   2018

Sydney              $18,700                      $1,150,000

Melbourne      $12,800                      $915,000

Brisbane          $17,500                       $560,000

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What that means is, 10 years from now it probably won’t matter whether you bought in a hot or a cold market. What will matter is whether you bought at all.

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#2. How does Australia compare with other countries

 

Mortgages in Australia are full recourse. This means if you default and the bank sells your property to recover the loan amount -if there is still a shortfall the lender has rights to additional assets beyond the security property.

 

It’s one reason why unlike America where you can simply post back the house keys and walk away, Australian property doesn’t see the same fluctuations and busts as other markets.

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#3. What comes first: Find a property or finance approval?

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Mortgage lending has changed dramatically over 2018. Even customers who would once be seen as ‘vanilla’ are being knocked back by certain lenders.

 

Speaking to a mortgage professional first is crucial.

 

It could save you from the most common mistake we see made. Getting 6 months down the track only to finding out had you done something just a little bit differently back then you would be approved by now.

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#4. The 4 factors to setting your budget.

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Know these before you do anything else:

 

1. Borrowing capacity

Find out which lender is willing to offer you what so that you can set your budget. This number can vary between lenders by as much a 20%.

 

Borrowing at your absolutely maximum is rarely a great idea. A good rule of thumb is to set your sights at the 10th highest figure a lender is willing to offer you.

 

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Pro tip: Credit card limits reduce your borrowing capacity even if you don’t owe anything. Don’t forget HECS and payment plans like Zip pay will be taken into account.

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2. Funds to complete

This is the minimum amount you need to to prove you have before the loan approval.

 

Funds to complete is made up of the minimum deposit the bank requires you to pay (genuine savings) + costs of purchase (stamp duty, legals etc) + Lender’s Mortgage Insurance (LMI) shortfall - minus any government grant.

 

See minimum deposit for more about this.

 

Pro Tip: Find out what grants and exemptions are available for different property types in your state.

 

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3. Prices in your desired area

Take a look at the market and speak with real estate agents. It can be more useful to research past sales rather than asking prices which can be misleading.

 

Websites like onthehouse.com.au and domain.com.au can tell you how much properties sold for and what the market conditions are.

 

We regularly see successful homeowners who are happy that they chose to compromise on area by moving out 1 or 2 suburbs. In other cases, we see young couples compromise on the 3rd garage so they can be closer to work.

 

Ultimately it’s often compromise which wins the day!

 

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4. Minimum repayments

Now you know what the banks and the market think, take a look at the minimum repayments required to meet that figure and make sure you could still be comfortable paying another half as much again.

 

Rates are at record lows now but only a decade ago they were double what they are now.

 

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Pro Tip: $3,200 a year is this extra repayments required for a 1% increase in interest rates for a $450K mortgage currently on 4% p.a.

 

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Now you should be a lot clearer about how much you should be spending.

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