Five tips for financially confident first home buyers

Purchasing a first home is a huge milestone and a goal to which many young Australians aspire.  As with most great achievements in life, careful preparation is key to ensuring a smooth and stress-free transition to first home ownership.


1/ Understand all the costs involved in purchasing property, not just the sale price

Buying a house involves a lot more than simply paying the agreed purchase price.  As a first home buyer, it is important to account for all the additional costs involved to ensure you have sufficient funds saved.


First, consider the stamp duty and other government fees that apply to each property sale.  Stamp duty is charged as a percentage of the property’s sale price and the amount differs between states.  However, some states (including Victoria) may waive stamp duty for first home buyers, meaning a saving of several thousand dollars.  Mortgage registration and transfer fees still apply, even if stamp duty is waived.


Other costs include legal fees for the conveyancer or solicitor who acts on your behalf in the transaction.  Building and pest inspections are always a good idea, and the cost of these services is money well spent.  Your new home loan application will generally attract an establishment fee and depending on your situation you may have lenders mortgage insurance (LMI) factored into the loan.  Finally, you will need to reimburse the vendor the portion of any council or strata rates they have paid beyond the sale date.


2/ Know how much you can really afford to borrow, accounting for interest rate changes

This is an area where your Marksman Finance, your local Melbourne mortgage broker, can offer advice to help you formulate a realistic purchasing budget.  While there may be temptation to overstretch your budget, it is important to maintain objectivity and leave a buffer to ensure you can still comfortably afford your mortgage repayments if interest rates should rise in the future.


3/ Have a plan for saving your deposit, accounting for any first home buyer allowances

If you don’t already maintain some form of written household budget, this is a great habit to establish when you start saving for your home deposit.  Taking immediate, proactive and achievable steps towards your savings goal is a great way to maintain motivation and track your progress over time.


Your savings plan needs to be specific in terms of the exact amount you estimate you will need for your deposit and purchase expenses, minus any first home buyer allowances you may be eligible for.  Once you know how much money your budget allows you to save each week, you can formulate a clear timeline ending in your first home purchase.


4/ Buy in an area you can comfortably afford, not necessarily the trendiest suburb

As the saying goes, you should rent where you want to live but buy where you can afford.  Home ownership should not be stressful—a trendy address simply isn’t worth the stress of an overstretched budget and a monthly struggle to meet mortgage repayments.


Your home should be a long-term investment so considering your future needs is important.  Are you planning to start a family within the next few years, or does proximity to your inner-city job make the most sense to you?  Plan your purchase accordingly.


5/ Obtain building inspections to avoid nasty and expensive surprises down the track

Some surprises are lovely—finding termites eating the walls or a glaring building defect in your newly purchased home, not so much.  Thankfully, a good building inspector can provide you with a thorough report on your future home’s condition prior to purchase so you can avoid expensive surprises.


Your reporting needs may differ slightly depending on the type of property you intend to purchase, but a building inspection and a pest inspection (sometimes the two are combined) should cover most bases.