Four things you may not know as a hopeful first-home buyer
The recent reduction in interest rates has presented an even greater opportunity for hopeful first-home buyers to purchase property.
The RBA lowered the cash rate for the first time in three years in June (from 1.5% to 1.25%) and then again in July (from 1.25% to 1.00%), and banks are following suit. No doubt plenty of young people are keen to embrace the low rates and get a foot on the property ladder.
If you are looking into buying your first home, we’ve detailed four things you might not know about the process.
You can get expert help
Learning about mortgages, researching the property market and talking about making an offer can seem like daunting prospects. But you don’t have to do it all alone. Experts such as mortgage brokers, conveyancers, lawyers and buyers agents can be a huge assistance in this process. Mortgage brokers especially can take the work out of finding the best home loan for you, and can be a great resource of information throughout the whole application process. Just be aware that they are acting on behalf of the lenders that pay them, and so may only present you with a small selection of potential home loans.
You don’t have to have a 20 per cent deposit (but it can definitely help)
It’s easy to get tied up in saving enough for a deposit. Having 20% provides a great headstart financially, but it can also be a significant hurdle for some young savers (and understandably so). But it is possible to purchase property even if you don’t currently have a 20% deposit. You will just need to pay lenders mortgage insurance. This is a significant cost, and you should consider it as part of your overall financial considerations and discuss your options with your lender. But if you don’t think you’ll have that 20% when you find your dream home, paying lenders mortgage insurance could be an option for you.
You could be in for a wide range of extra expenses
Besides potential mortgage insurance costs, there are a lot of somewhat surprising expenses that come with your first house purchase. Stamp duty, moving costs, property valuations, building and pest inspections and even the cost of buying new furniture are all factors you might need to consider. You will also need to start paying insurance on your home from the day you sign the contract. Your bank or mortgage broker should help you with this when they first assess you for a loan. If you’re unsure about any of the costs, they are a good place to turn to.
Your super account can help you save for a deposit
The First Home Super Saver (FHSS) scheme can help you save for a house deposit through your super account. It’s a handy way of boosting your savings and keeping them completely untouchable until you’re ready to put down that deposit.
Using the FHSS, you can make voluntary contributions to your super account of up to $15,000. Any voluntary contributions (which is money you personally contribute to your account) that you have made since 1 July 2017 can be included.
Thanks to the tax benefits available in super, and the deemed rate of return available with the FHSS (based on the 90-day Bank Bill rate plus three percentage points), the FHSS could help you save for your deposit faster.
Learn more about the First Home Super Saver scheme here, and start saving through your super account!