First Home Buyers – It’s Not That Hard Purchasing Your First Property!

Buying your first home is a milestone event to be immensely proud of, but it can also be very overwhelming. Many lenders have first home buyers mortgages available that make the entire process more streamlined, and they also have incentives that encourage people to buy.

Defining a First Home Buyer

A first home buyer is an individual who has never owned a home before. Many lenders will investigate your history to determine whether or not you’d be eligible for this type of home loan. If you qualify, the next step is deciding which first home buyer product is right for your situation, our friendly brokers will do the shopping around and homework for you depending on your unique circumstances.

There may also be financial restrictions in place that you have to meet to be eligible for this type of loan. A lot of the time, certain grants have an income cap because they target people who have moderate or low incomes. If you earn too much or don’t know much about these grants, your broker can help you find alternatives that better suit your annual income and needs. Your broker will also get you up to date with what government grants you are eligible for as a first home buyer.

The Common Loan Types When Setting Up Your First Loan

Principle and Interest VS. Interest Only Repayments

Generally, when you make a loan repayment, your repayment pays down some of the principal balance as well as the interest accrued. This is known as principal and interest repayment.

However, you may be able to choose to make interest only repayments for a specific period, so you’re only paying interest charged. This means your repayments during that period will be lower than principal and interest repayments. Because you eventually have to repay the principal balance, this interest only periods is always limited.

You need to consider your financial situation to plan for the end of your interest only period, when you switch to principal and interest repayments, as your repayment amount will be higher.

Variable Rate Loan

Simply put, a variable rate loan has an interest rate attached to it that fluctuates over your mortgage’s life. It can go up and down with the local market. It can fluctuate due to the Reserve Bank changing cash rates, or your financial institution may simply make a business decision to change their rates. These loans offer a large degree of flexibility that allows you to pay off your mortgage faster without penalties. Variable loans also have sub-types including standard, revolving line of credit, or basic variable loans.

Fixed Rate Loan

A fixed rate loan or mortgage means that you lock in the same interest rate for a set period of years. The most popular range is between one and five years where it won’t go up or down with the market. This gives you certainty about your payment amount for at least a year or two, and it can help you save and prepare your finances.

Split Rate Loan

A split rate loan combines two different loan structures. Part of your loan is a variable rate and the other part is a fixed rate loan. This unique mortgage gives borrowers the certainty of having predictable payment amounts, but your variable repayments can decrease if the interest rates should fall.

Honeymoon Rate Loan

A honeymoon rate loan offers borrowers an introductory rate for the first few years that they have their mortgage. You’ll pay a lower interest rate while you adjust to paying your monthly mortgage payment and balancing your finances. At the end of the honeymoon or introductory period, your interest rate switches to the home loan’s normal interest rate. This can be higher than other loans, so you should to double-check the standard rate before you sign up for it.

First Home Buyer Benefits

Being a first home buyer comes with several features that can help ease your way into your first loan, and in recognition of your milestone achievement.  Some of the biggest benefits include:

Deposit

Lenders recognize first home buyers and allow borrowers to make a small deposit or no deposit at all. In turn, borrowers can save more money for emergencies or to put it toward other fees. The most common deposit requirements are a 10% deposit which also incurs Lenders Mortgage Insurance. However we have lenders who will allow you to use your parents as guarantors (as long as they own property with sufficient equity) and eliminating the need for you to pay your deposit OR stamp duty out of your pocket!

Lower Interest Costs

Some of our lenders subsidize interest rates for first home buyers, and this can help them qualify for a lower interest rate. This means a lower overall monthly payment and less strain on the finances.

Grants

Australia has several grants for first home buyer mortgages. These grants can help you pay the deposit, closing costs, or agent fees, and you can also use it for improvements on your home.

Fee Limit

Many mortgages set caps or limits on how much a lender can charge the borrower in miscellaneous fees. This helps the borrower better prepare for any upcoming costs associated with closing on your new home.

The Process of Buying Your First Home

Decide to buy

Contact one of our friendly brokers who will determine your borrowing capacity and look at your overall financial position. You’re usually ready when you’ve saved up approx. 10-20% of your desired property price. There are other ways to get into the property market without having a deposit! We have lenders who will allow your parents to offer their property as security meaning you won’t have to pay a deposit or even stamp duty out of your pocket!

Find a loan that suits you

Talk to our mortgage brokers and know what your loan options are. We’ll analyses your overall financial position and either commence working on your application for approval OR put a plan in place to get yourself ‘property ready’ in the near future. If you’re in a suitable financial position and are ready to take on a loan, our brokers will submit a pre-approval for you, ensuring you have the confidence to shop around knowing exactly what you are approved for.

Have Your Conveyancer Ready

If you don’t already have the help of a conveyancer ready, we can recommend you professionals that share the same values of excellence and world class service to assist you with your conveyancing needs. What does a Conveyancer do? They check through contract of sales prior to you committing, ensuring there is nothing out of the ordinary for you to worry about. They’ll also assist with ordering any building or strata reports ensuring you won’t be up for any damages or hidden surprises post settlement of your property. Your conveyancer will also represent you at settlement with the lender making sure everything is in order for the property to settle smoothly.

Search for your new home

Are you considering a house, an apartment or an investment property? Whatever your selection, numerous factors can and will influence the value of the property such as long term grown potential or access to amenities. Think of our brokers as your personal property assistants. Your dedicated broker will work side by side with you answering any questions you may have about prospective property and importantly, if it is within guidelines of your loan approved. Your broker will make the process of buying your first property as smooth as possible.

Make an offer and get settlement in order

Found the perfect property and negotiated with the agent for a fair price? It’s time to sign the contract of sale. If you’ve purchased through private treaty, you will have a cooling off period to give you the time to do any checks with your conveyancer and ensure your finance is in order. If you’ve purchased via auction, you’re usually subject to sign something called a section 66W, meaning no cooling off period, so make sure you’re 100% prepared, ready and completed all your searches prior to auction day! Once the contract is executed and cooling off has lapsed, the standard settlement date is 42 days after the dated contract of sale. Between then, your broker will make sure your finance is all approved, executed and ready for this settlement date, they’ll work with your conveyancer to ensure all occurs smoothly.

Settlement

Congratulations – the place is now yours! It’s now time to move into your new property and plan ahead with your finances so you can to help pay off your mortgage sooner. If you’re using your property as an investment, it’s usually recommended to contact your real estate agent a few weeks prior to settlement to give them the heads up of your intent to rent out the property, this will give them the time to prepare your property and minimize and vacancy period.  Our brokers will keep in touch with you after settlement ensuring you’re comfortable and have no questions or problems settling into your loan!

Contact Us for First Home Buyer Mortgage Assistance!

If you’re considering purchasing your new home, don’t go it alone. Instead, enlist the help of our dedicated brokers. We’re on hand and ready to help answer your questions, address your concerns and find the best first home buyer mortgage to suit your needs today! Contact us on on 02 9121 6247 or submit your scenario online.