First home buyers myths exposed!
Buying your first home may be the biggest financial decision and commitment you ever make. However, for some First Home Buyers, the whispers and stories they hear about buying a property encourage them to stay at home, or continue to rent, rather than get their feet on the property ladder.
Here are some facts to dispel some of the common myths you may hear.
I need to pay off all my other expenses before I can apply for a home loan
Not true! You can still secure a home loan if you have an existing student study debt, or a car loan. When a lender is assessing your ability to service a loan, they certainly look at your current expenses such as any outstanding loans or credit card limits – but just because you might have one or both of these expenses, does not mean you won’t get your loan approved. Lenders look at your WHOLE financial situation – your income, your expenses and other debts, the valuation of the property you are wishing to buy, and the percentage of that value you are hoping to borrow from them – before they determine your suitability to pay off the loan.
The parental guarantee scheme no longer exists
False. Security Guarantees are still an option for first home buyers, but not with all lending institutions in Australia. A lender’s Security Guarantee is essentially a parent or family member acting as a guarantor to your mortgage, giving you the extra financial support needed to maximise your chances of meeting the requirements of the bank. The parental guarantee scheme can give you a head start by making it easier for you to get into your home with help from others, and can be used to buy a home or invest.
You need a 20% deposit to buy your first home
Whilst this true in some cases, the size of the deposit you need to put down is actually dependent on various factors, including what you are looking to buy, where you are purchasing, your current income and expenses, and which lender and product suite you choose to go with. There are loads of lenders out there who will lend up to 90% of the purchase price, or even 95%. However, if you borrow over 80% of the total price of the property, you may be required to take out Lender’s Mortgage Insurance, or your interest rate might be slightly higher.
It’s cheaper to rent
It can be, and again, there are many variables to this equation - such as where you buy, where you are renting, and which loan option you choose to go with. We really can’t dispel this myth in a short newsletter article as there is a lot to take into consideration: rental price, bills, purchase price, stamp duty and other transaction costs, the expected mortgage interest rate, how much it costs to run and renovate the property, expected capital gains – and so on.
First Home Owners Grant
The First Home Owners’ Grant has evolved. Introduced as an initiative to get first home buyers into their first home sooner, the grant has increased the amount to which Queenslander’s can be granted and the eligibility criteria to which you can apply.
Here's what is currently available to first home buyers in Queensland.
- $15,000 for contracts dated October 2012 to 30 June 2016, or 1 July 2018 or later
- $20,000 for contracts dated from 1 July 2016 to 30 June 2018
What for? Building or Buying a new home valued up to $750,000
Queensland also offers stamp duty concessions for first time home buyers, full exemption up to $500,000 and a sliding scale from $500,000 to $549,000.
Eligibility Criteria Check - you will need to answer YES to all of the following:
- You’re at least 18 years of age
- You’re an Australia citizen or permanent resident) or you’re applying with someone who is an Australia citizen or permanent resident
- You or your spouse have not previously owned property in Australia
- You’re building or buying a new home
- The value of the home is under $750,000
With the First Home Owners’ Grant giving you a head start on your deposit, how much deposit do you really need? 5%, 10% or 20%?
Real Estate Tips For First Home Buyers
The charm of staying in your own home is incomparable but, considering that combined capital city house values continue to gradually increase, are you sure you can afford the house of your dreams in the area you really wish to stay?
Here are some tips to make your dream a reality.
Support for Home Buyers
Of course, first home buyers purchasing their own home could boost their savings with State Grants and stamp duty concessions. They can also opt for parent guarantee loans or pay LMI to secure a high LVR loan. However, there is a more affordable way for first home buyers to step into the property market.
Rentvesting, or renting where you want to and investing where you can afford to, is fast catching up with savvy first home buyers who are comfortable with the idea of buying an investment property as their first home. This not only allows them to continue with the lifestyle they are used to but also allows them to use the rental income from the investment property, and the gradually building equity, to fund their own home much sooner, without undergoing significant financial stress. Investment properties also offer major tax benefits that investors can gain from.
Buying a well-researched property
First home buyers who are looking to break into the housing market could benefit greatly from rentvesting. Affordability is a major factor to consider when buying a house. Instead of paying too much for a popular suburb that may have already peaked, it is smarter to look out for upcoming suburbs that are currently affordable but well serviced. Most of these areas fringe the popular suburbs, sharing the amenities but offering low-priced houses. Spot the next upcoming suburbs for your investment.
Being financially disciplined is the key to growing wealthy. Those who plan to buy a property must take a look at their expenses, and follow a household budget that minimises extra expenditure and maximises savings. Use Coronis Finance online calculators to set a budget or savings target.
Choosing the right home loan
Several banks, as well as non-bank lenders, offer home loans at competitive rates. When searching for a home loan, it pays to shop around and compare home loan deals online to choose one that best fits your requirement. However, borrowers must understand that instead of choosing the cheapest home loan, it is prudent to pick one with essential features (such as free additional repayments and redraws, an offset account, etc.) that will help them save more in the long run.
Seek expert advice
As a first home buyer, you might find yourself confused in a market flooded with jargon, self-professed experts and unsolicited information. Seek expert advice before making one of the biggest investments of your lifetime. Talk to a Coronis Mortgage Broker who will be able to help you put the right foot forward when it comes to getting into the property market.
Tips for renters to save for a house
By the time the rent, bills and groceries come out of the paycheck, there isn’t a lot left to play with, yet alone stash away in the savings account.
So how do you save enough money for that elusive deposit?
Set a goal
If you set your eyes on the prize, you will have a better chance of achieving it. Therefore, think about what suburb you would like to buy in, if you want an apartment or house and if you want to buy new or renovate. Once you have decided what you eventually want to buy, research the average price and establish how much 5-10% is which will equal your deposit. Ultimately, the bigger the deposit, the better but this will at least give you a goal to work towards.
Establish a budget
Sit down and write out all your weekly or monthly expenses and review where you are spending your money. It’s the oldest trick in the book but it could help you identify where you could save. For example, if you buy a large coffee every morning on the way to work, over a month you will spend at least $110, which over a year is more than $1320. Seeing those types of figures could be enough to trigger behaviour changes if you’re motivated enough to buy your first home. Then again, if you don’t want to sacrifice your lifestyle in order to save, look at other areas where you can cut back.
Once you work out home much you want to save each week, set up a direct debit from your everyday account to your savings account so that it comes out as soon as you get paid. This way, you will avoid the temptation of having extra money sitting in your everyday account to spend on a night out or new outfit.
Pay off your debts
Paying off your debts will not only increase the amount of money you can borrow but it will free up your paychecks when you eventually do get a mortgage. You’ll also save money long-term on the interest repayments.
Sell unwanted items on eBay or Gumtree
If you have clothes, shoes, accessories, kitchen wares, furniture etc that you no longer want or use, Gumtree or eBay are great options to offload them and make a few dollars along the way. It will be a great way to clear out the clutter in preparation for your move as well.
Challenge big bills and negotiate interest rates with the banks
If a big utility bill comes in that seems out of the ordinary, call up your provider and question it, don't just pay it. In most instances, they will be willing to work with you in order to keep your business. And review your credit card, if you aren't using the awards or benefits attached to your credit card, switch to the low-interest rate card or at least ask your bank what other options they have. Like the utility providers, the banks are keen to keep your business so they should be willing to work out the best solution for you.
Cut back on the luxuries
If you are desperate to get that deposit together as quickly as possible, think about cutting back the luxury items for a period of time such as:
- Alcohol and nights out on the town
- Eating lunch out every day & packing it instead
- New clothes or shoes
- Magazine subscriptions
What to look for when buying your first home
When thinking about buying your first home the obvious things come to mind: creating a budget, finding a respectable and knowledgeable real estate agent, creating a list of ‘non-negotiables’ including locality, pricing, size of the home, and possibly things like proximity to schools and public transport.
We’re here to tell you that there are other more subtle things to consider that are just as important to your finances and future home.
Think about the long-term whilst keeping in mind resale. Do you want to keep the house? Raise children? Take care of your elderly relatives? Now, if you had to sell the house, who would be your targeted buyer? Living out of a popular school district may deter parents with children, as much as a busy street would with noise and heavy traffic. Think ‘lifestyle’ when buying – one that will suit you and your potential buyer in years to come.
Cover the neighbourhood demographics. If your prospective home is in a neighbourhood full of renters, a couple of bad apples, as well as a couple of bad landlords, could negatively affect the value of your home (as well as your emotional happiness). If the neighbourhood is populated with young families and you’re a few years away from having a family of your own, would you be able to tolerate the noise level?
Make a list of essentials and must-haves. Create a checklist of things that you need to have versus things that would be nice to have. It’s difficult to leave our emotions at the door throughout this process but if you must have a two-car garage, then so be it. No use settling for a toolshed in the backyard which would possibly accommodate a single vehicle because the home has a nice front porch. Believe us, if your checklist is true to your ‘must-haves’, it will be easier to make your decision. Keep looking, your dream home is out there.
Budget all expenses relating to having a home. There is more to your budget than just your mortgage repayments. You will need to consider utilities, commuting, schooling, and possible housing upgrades or repairs. Now after some quick calculations, does the prospective home still fit your monthly budget?
Five Common Mistakes Of First Home Buyers
Getting ready to buy your first home? It’s an exciting time, and it’s easy to make mistakes. Here are five common ones that you should try to avoid!
1. Relying only on advice from family and friends
Family and friends are people you can trust, so it’s understandable that you listen to their advice. However, while they may have the best of intentions, it’s always best to seek independent professional advice when buying a property. Things may have changed a lot since your mum and dad purchased their first home, and your circumstances are likely to be different. They may also have made mistakes without even realising it.
As a first home buyer, you’ll want a team of experienced professionals in your corner. That means a reputable mortgage broker, a solicitor or conveyancer, plus a building and pest inspector. A good accountant can also be invaluable, particularly if you are self-employed.
2. Blowing the budget
The last thing you want is home loan repayments you can’t really afford – you might end up eating baked beans for years to come! That’s why it’s so important to have a solid grasp of your financial situation and budget.
Mortgage brokers can help you understand your borrowing power and create a home-buying budget. That will help save time when you start looking for your dream home.
3. Underestimating the costs involved
Many first home buyers don’t understand the full costs involved in buying a property. There’s a lot to consider – your deposit, stamp duty, lender fees and charges, solicitors fees, and so on.
Then there are the ongoing costs associated with home ownership. These may include rates, insurance, body corporate fees, maintenance, and repairs.
4. Getting the wrong mortgage
As a first home buyer, getting your head around all the different home loan products out there can be overwhelming. Offset accounts and redraw facilities. Fixed versus variable rates. Split home loans and lines of credit. It’s enough to give you a head spin! It’s important to choose the mortgage that is most suitable for your needs and saves you as much money as possible.
A mortgage broker can: 1) understand where you’re at financially and where you want to be; 2) compare the home loan market; 3) find you the right home loan, based on your specific financial circumstances; and 4) walk you through the home loan application process.
5. Being blindsided by emotion
When you’re new to the property hunt, it can be easy to let emotions cloud your judgment. However, try not to let your daydreams get in the way of the facts. Do your research to ensure you’re buying the right property for the right price.
Property Research Checklist
Thorough research is the best way to know that you're making the most informed decision. And when it comes to investing such a large sum of money, you'll absolutely want to know that you've made the right one.
Here are some things to look for when you start researching property.
RESEARCH YOUR BORROWING POWER
For this first point, you don’t actually have to do too much. All that’s required of you is to pick up the phone and chat with us! As your mortgage broker, we’ll determine your borrowing power and give you a clear understanding of how much you can realistically afford to spend. We’ll ask you about your income, expenses and get to know you financially, so we can give you an accurate indication of your borrowing power and ensure you’re looking in the right price range from the very start.
RESEARCH THE SUBURB
Now that you’ve got an idea of how much you can borrow, it’s time to start researching where to buy. Whether you’re a home buyer or an investor, the aim is to purchase in a suburb with solid capital growth potential, and to buy at the early stages of an upturn, not at the peak of a growth cycle.
There are plenty of great online resources to access market reports on specific areas. These contain details about everything from median prices and growth rates to rental yields and demographic trends. RP Data CoreLogic, realestate.com.au, Residex and domain.com.au are just a few examples, and you can also ask us for a property report.
It’s a good idea to consider the average rental yield of the area and of a particular property. The rental yield is the rental income expressed as a percentage of the property’s value. If there is strong demand in an area, the rental yields may be higher, but if there is a high vacancy rate, the rental yields may stagnate or decline.
RESEARCH THE PROPERTY
During inspections, you should go through the property with a fine-toothed comb. Inside the property, check the ceilings for water stains and the cornices for waviness, which may indicate water leaks in the roof. If the property is carpeted and you want to pull it up, find out whether there’s cement or floorboards underneath. As you stroll through the property, be mindful about the evenness of the floor. Before you buy, it’s always a good idea to get building and pest inspections. The peace of mind of knowing your property won’t collapse or be eaten up by termites is worth the fees.
Outside, look at the condition of the gutters, check for cracks in the brickwork and for mildew in the eaves, which may indicate issues with run-off. Keep an eye out for cracks in the driveway, which may mean there’s a lot of ground movement on the property.
RESEARCH THE PRICE
The best way to research the price you may end up paying is to compare other recent sales prices for similar properties in the same location. You can find recent sales via websites like realestate.com.au. Make sure the land size is similar and the condition of the property is comparable. Regularly attending inspections will also help you to formulate a clearer picture of the going rate for similar properties. Lastly, it’s important to research additional ongoing costs such as council rates, strata fees, and water costs. Most of these outgoings should be included in the contract of sale.
RESEARCH THE PROFESSIONALS YOU’LL NEED
During the buying process, you’ll need professional support you can depend on, including us as your mortgage broker, a solicitor, and building and pest inspectors. When researching who to use, it’s a good idea to ask friends and family for recommendations. Also, check each service provider’s online reviews. And if you do need a referral to a professional we can vouch for, please don’t hesitate to ask!
Buying Old or New? Here's 4 factors to help you decide
Should you invest your money into an older-style Queensland home which can be improved with renovations or buy a newly renovated Queenslander allowing you to move into instant comfort?
When you’re deciding between old or new, here are the top four factors to consider.
Location: Is buying in your ideal neighbourhood important to you?
Many established suburbs have a charm and appeal that is not easily replicated. To invest or buy in these suburbs, you will probably have to buy old and renovate as new homes and blocks of land are sparse. Adding your own charm to an established home and neighbourhood is a sure way to investment success.
Lifestyle: Can you live in the non-changeable floor plan of an old home? Customisation may be key.
Buying old forces you to live within the current floor plan and without an astronomically expensive extension which will push your savings account to the limit, it’s not going to change. Old homes were obviously designed for different owners in a different time, which may not suit your twenty-first century lifestyle needs. So take the floor plan into account when deciding to buy old or new, especially if building a new home and customising a floor plan is an option for you.
Finance: Don’t stop at your mortgage repayment, consider the ongoing expenses as well.
A good reason why ‘old is gold’ is that you can renovate or extend the property to create equity straight away. But don’t forget to consider the ongoing need for repair and maintenance as well as the land and building costs in that area, so you can calculate this against the asking price of the property. New homes may have higher loan repayments but a lower cost of living which will put the investment financial decision on par.
Value: What are you looking to get out of your old or new home?
If you are looking for instant revenue, consider appreciation of depreciation. Investment properties are eligible to claim depreciation on all items of the property and the newer the property, the higher level of depreciation which is available to you. Remember new property prices are dependent on the market, so if the market dips due to an oversupply of stock through other developments in the area, you could find your property value will flatten making the depreciation pointless. Talk to a local real estate agent and find out as much information as you can before you buy.
Buying your first home can be a complicated process but we have the experts who can walk you through your options. Get in touch with Coronis Mortgage and Finance today: