Financing your first home
Buying your first home is a not only a very important but also a very rewarding moment in your life. However when buying your first home, it’s important to be fully aware of the wide range of costs that come with it, some of which you may not be aware of when you first start the purchasing process.
There are a range of different financial considerations to take into account, such as knowing the amount you need to borrow, what your borrowing limits are, the costs involved during the buying cycle, creating and managing your budget for your mortgage repayments and finding the most suitable home loan for you.
Costs involved in buying
When buying your first home, you do not simply pay for the cost of the new home, but there a range of additional taxes and insurances you need to account for which will affect your overall budget for your home. Some of the major costs to additionally factor into your budget include;
- Stamp duty - a tax set by the state government that is imposed by the purchase of your real estate asset. Stamp duty can add up to 4-6% on the purchase price of your property.
- Bank and government fees - Additional bank and government fees include bank valuation fees, title registration and council imposed fees
- Solicitor and conveyancer costs - consultation of any legal services prior to purchasing your first home may be a safety net to steer you around the potential legal pitfalls that may arise when buying property to ensure your property is a safe purchase.
- Lenders’ Mortgage Insurance (LMI) premium - a one off insurance payment which protects your mortgage lender against your default. LMI is commonly paid when the Loan to Value Ratio (LVR) is 80% or more. This occurs when more than 80% of the value of the property is borrowed from the lender by a buyer.
You can purchase a home with a deposit less than 20% but this will incur LMI premium fees added on top. On the other hand, if you’re purchasing a home with a larger deposit, you won't have to pay LMI fees and can build equity much faster by paying off your home faster and reducing the amount of interest required to pay.
Deposit amount required
Additionally, a First Home Owners Grant (FHOG) will help in reducing some of the deposit costs, but you will need to be eligible to apply. The First Home Owner Grant (FHOG) is a one off payment to first home owners that is used to offset the effect of the GST on home ownership.
How to save towards a deposit
As soon as you know the deposit required for your new home, you can start saving towards that goal. Whilst the total amount of the loan may seem daunting at first, starting small and building your budget will help make the task seem far more manageable. A budget will allow you to note all costs and essentials that comes with your purchase. As with everything however, it is important to be realistic with your saving goals to ensure the loan repayment and daily life expenses are both manageable going forward.
Doing research into the best savings account will also enable you take advantage of the best interest rates to help maximise your savings. Be sure to consult with different lenders and banks that will look to find and compare the best home loan rates - either for fixed or variable repayments.
The most important saving tip however is to constantly keep an eye on your budget and replan according to any changes happening in your life. When dealing with such a large and important life expense, make sure you put yourself in the best position to move forward financially stable and stress free.
If you are interested in buying your first home or have any related enquiries, please get in touch with any of the friendly staff at First Home Buyers Direct on (08) 9244 7444 or complete our online form.
Posted by First Home Buyers Direct on 28 March 2017 | 0 comments
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