Purchasing a home is likely one of the biggest financial investments you’ll make in your lifetime – if not the most significant. For many of us, a home purchase is only possible with the help of a mortgage loan, which adds an extra layer of complexity to studying the market for the right property.
If you’re looking to buy your first home, there are a few things you need to know before jumping into the real estate market. To help, our team at Noel Jones have compiled some practical tips for buying your first home.
1. Get a Firm Understanding of the Upfront Costs Involved
The first thing you need to do is get a firm understanding of all the upfront costs involved in purchasing a home. This includes the deposit, stamp duty, conveyancing expenses, and any other fees associated with getting a mortgage loan. In most cases, you’ll need to have at least 10% – 20% of the purchase price saved up for the down payment (as well as meeting a range of lending criteria). If you choose to borrow more than 80%, you will also need to pay for Lenders’ Mortgage Insurance to reassure the bank in this new relationship.
2. Learn About the Ongoing Expenses Related to Home Ownership
In addition to the upfront costs, you must also be aware of the ongoing expenses associated with owning a home. This includes things like your rates, interest repayments, home and contents insurance, and general maintenance and repairs. When budgeting for a new home, be sure to factor in these additional costs so you have a realistic understanding of what you can afford.
3. Build Out a Realistic Budget
Once you have a firm understanding of all the costs involved, it’s time to start building out a realistic budget. In addition to your monthly mortgage payment, you’ll need to account for the ongoing expenses we mentioned earlier. You should also have a buffer saved up for unexpected repairs or maintenance issues that may come up down the road.
4. Study the Ideal Loan Type & Seek Out Pre-Approval
Before you start shopping for a home, take the time to study up on the different types of loans available. This will help you better understand the pros and cons of each option so you can choose the best one for your needs. These include:
- Owner-occupier loans: For borrowers who plan to live in the property themselves. The interest rates on these loans are typically lower than for investment loans.
- Investment loans: For borrowers who plan to rent out the property. The interest rates on these loans are typically higher than for owner-occupier loans.
- Fixed home loans: The interest rate is fixed for a certain period, usually 1-5 years. This can give borrowers peace of mind, knowing their repayments will stay the same even if interest rates rise. If interest rates fall, you will be stuck with a higher rate than currently available.
- Variable home loans: With these loans, the interest rate can go up or down over time based on the cash rate. Repayments will also fluctuate, but you will usually have the option to make extra repayments, which offsets any increases in the interest rate.
- Split loans: A combination of fixed and variable rates, giving borrowers some stability while still allowing them to take advantage of any decreases in interest rates.
- Construction loan: For borrowers building a new home, releasing lump sums in stages to save on interest payments.
Once you know what type of loan you want, you can seek pre-approval from a lender. This will give you a better idea of how much money you can borrow and will make the home buying process smoother overall.
5. Become Well Versed with the Real Estate Market
To get the best deal on your new home, it’s important to become well-versed in the real estate market. Keeping an eye on interest rates, housing inventory, and average home prices in your area will put you in a much better position to negotiate a great price on the home of your dreams.
6. Research Financial Assistance Grants & Schemes Available for Support
If you’re having trouble coming up with the necessary funds for a down payment or closing costs, several financial assistance programs are available to help. For example, many states offer different forms of First Home Buyer assistance, such as a reduction in stamp duty payable and even instalments of several thousand dollars.
Receive More Assistance When Looking to Buy Property in Melbourne with Noel Jones
Purchasing a home is a big financial investment, but with the right preparation, it can be a smooth and rewarding process. By following these practical tips for buying your first home, you’ll be on your way to becoming a proud homeowner in no time. For further assistance in buying a property in the eastern suburbs of Melbourne, please contact us at Noel Jones today.