Detailed Guide To First-Home Buyers

Detailed Guide To First-Home Buyers

If you are deciding to get married and buy yourself a home – You probably will fall in the category of a first-home buyer.  

By definition, first home buyers are those people who purchase a principal residence for the first time. As a new buyer, both excitement and anxiety rule the state of your mind.  

Just after thought to buy a house, several questions like – what to look for in a property, what type of properties are available in the market, how to begin the process of buying a property, how to take a loan, and which home loan will suit your requirements, how to find a real estate agent, who is the best real estate agent for you, etc., will be there on the mind. As a new entrant in the property market, it is fine and natural to have such thoughts.  

This blog will answer all the queries that have the potential to blow your mind. It will guide you and explain to you the entire home buying process so that you enter the market with confidence.  

Definition of First-Home Buyer 

Anyone who has not previously owned a house or a flat and also has no property to sell is classified as a first-home buyer. Or we can also say that anyone who is getting a mortgage who is neither a home mover or buy-to-let investor or even simply mortgaging is also termed a first-time buyer.  

Determine the Purpose of Buying a Property  

You know that you have to buy a property but first, you need to decide the purpose.  

What is Your Purpose? 

Are you going to buy a property to own and move in with your partner and family, or are you going to buy a property to rent? If you want to buy a house to rent it further, it means you want to purchase an investment property.  

Whatever the purpose may be, the decision of buying is once in a lifetime opportunity. It must not be taken in a hurry. This will probably be one of the largest investments you will ever make unless you decide to buy a luxury car. So, take the decision wisely.  

“Buying a home is like investing in luxury for a lifetime. A single wrong decision can cause you to lose, both emotionally and financially.” 

Before you take any decision, look into the advantages and disadvantages of owning and renting a property.  

Advantages of Owning a House 

  • It is a long-term investment.  
  • You secure yourself a valuable asset for life. 
  • You own the land and the building. So, you have the freedom to make changes inside and out of the home premises. 
  • Have as many pets and children as you want.  
  • You get to choose the location of your choice. 

Disadvantages of Owing a House 

  • Hidden costs involved – stamp duty, loan establishment fees, and lawyers’ fees. 
  • On-going costs involved like repairs, council rates, and others. 
  • May get difficult to buy a home because a huge investment is required. 
  • You may have to settle for less due to less budget.  

Advantages of Renting a House 

  • No financial burden as you will not have any debt through a mortgage. 
  • You have an option to choose between a fixed or a periodic lease. 
  • You do not have to worry about maintenance and repair.  
  • You can rent a house in an area you may not be able to afford.  
  • Mortgage interest rates vary whereas rent stays the same for an agreed time period.  

Disadvantages of Renting a House     

  • A fixed tenancy may not be good for the long term. 
  • What if the landlord refuses to renew the lease ahead? Quite a possibility. 
  • You will have to take special permission to keep a pet. Many owners do not allow keeping a pet. 
  • If the landlord increases the rent, you may have to vacate it or pay more.
  • You cannot make changes to the property as per your taste. No additional photographs, screws, or anything of your choice is not allowed. 
  • Other hidden costs are also involved like bonds, letting fees, and even the advance rent. 

Look into both the pros and cons before taking any final decision.  

The final call will obviously be yours and that should be taken after due consideration.  

Once you know the purpose of buying a home, it gets easy to move ahead with the rest of the home buying process. 

Determine the Costs Involved  

Hire the right real estate agent for yourself if you are considering taking a big leap into buying your first home. Real estate agents in Narre Warren are trustworthy, reliable, and have years of experience in the real estate industry. They stay updated with the changes that happen every day and guide their clients accordingly.  

Real estate is quite dynamic and vast. There are a lot of minute things that a layman may not be able to understand or see just, for example, the unexpected hidden costs involved. Only an expert can guide you about the hidden costs.  

The real estate agents in Narre Warren will guide you from beginning to the end and keep everything upright, and transparent.  

What are Hidden Costs?  

These are the unforeseen expenses that add to the budget unexpectedly. The hidden costs can vary from minor to major. These can have a major impact on the budget that you set to make a purchase. So, it is important to know what all are the hidden expenses. 

Stamp Duty 

This is the tax levied by all Australian territories and states on property purchases. This tax is paid by the buyer and is levied according to the property purchase price, loan purpose, and location. The stamp duty charge differs as per the states. This is one of the biggest costs that you will have to pay. So, it is important to consider it and add it to the budget plan before taking a final decision.  

The variation in stamp duty rate depends on factors like: 

  • Are you buying vacant land or a house? 
  • Being a first-home buyer.  
  • Buying a home to rent or to reside  

Here’s good news! 

Some states in Australia offer their first-home buyers a concession on the stamp duty. 

First Home Concession  

You can claim this concession for transfer duty when acquiring your first home but on meeting the given requirements. 

  • The first home concession is applied only to the homes that are valued under $550,000 and can save you up to $15,925.  
  • The concession may still apply for a home valued at over $550,000. 
  • You can claim it even if you are not an Australian citizen or PR. But as a foreigner, you may have to pay additional foreign acquisition duty.  

Eligibility Criterion  

As a first home buyer, you must: 

  • Have never claimed the concession before. 
  • Have never held any interest in another residence anywhere in Australia or overseas. 
  • Be at least 18 years of age  
  • Move into it with your belongings. Live in the house daily within a year of settlement. (No extension in the time). 

Stamp duty is just one, there are many other expenses too like loan application fees, mortgage insurance, ongoing loan fees, mortgage registration fees, lender’s property valuation, conveyance, legal fees, and so on. 

At this point, you will know what type of house you are looking for, at which location, the budget will be set considering various costs involved, and most importantly, you will know if you are eligible for a first home concession or not. 

After all this, you will decide the type of loan you need. Before you commit to searching for buying a home, you will have to obtain housing finance from a mortgage lender.  

At this point, you will have to decide the type of loan you want. There is no rule or any set answer as it will totally depend on your personal preference.  

What is the First Home Buyer Loan? 

A home loan is an amount of money that is lent by a bank or any other financial institution to finance the purchase of a property.  

A first home buyer loan is the type of loan meant for people who look forward to getting their first foot on the property ladder.  

The first home buyers can opt for a loan to ease the home buying process. There are three types of home loans: 

  • Fixed Home Loan  
  • Variable Home Loan  
  • Split Home Loan and  
  • Others  

What is Fixed Home Loan? 

This is the type of home loan where your interest rate is fixed i.e., tied up to one amount. It does not fluctuate or vary. Both your interest rate and the required repayments will not change for a time span of six months to five years.  

What is Variable Home Loan? 

This is the type of home loan which has floating interest rates. The interest rates are charged as per the market interest rates. It means the amount you will pay every month can change.  

Split Home Loan

This is the type of home loan where you divide your home loan into multiple parts you can nominate one portion of the home loan to have a fixed interest rate, while you can choose other portions to have a variable interest rate. So, this type of loan gives you the best of both worlds. 

Other Loans  

There are other loans too that you can look into before finalizing anything.   

  • Introductory loans or also called honeymoon loans 
  • Low doc loan  
  • Interest-only home loans 

Every loan has its own pros and cons. So, it is better to measure both the advantages and disadvantages before finalizing the loan type. Another great thing for first home buyers is the availability of the home owner’s grant.   

What is the First Home Owners Grant?  

The first homeowners grant is a national initiative started by the Australian Government. FHOG was introduced on July 1, 2000, to offset the effect of GST on home ownership. This scheme is funded by the states and territories and is administered under their own legislation. As per the scheme, a one-off grant is payable to the first-home buyers who fulfill all the eligibility criteria.   

Using the First Home Owners Grant  

Every state has its own guidelines and regulations with the first home owner’s grant. Some states may have a stamp duty while others may not have it on the top of the FHOG.  

Why Should You Avail the Benefits of the First Home Owners’ Grant? 

Purchasing a home involves a huge amount and as you may move ahead with each step, the cost associated with it can add up rapidly. This grant is free funding by the government. It is not a short-term loan that you have to pay back. Some states in Australia offer grants of up to $15,000, which can be of great help when saving a deposit for your first dream home.  

When Do You Get the Fund? 

The grant is paid to you once your property reaches the settlement. So, it is a good idea to consider its usage while you set the home budget. Even before lodging the application, you must know where to use the fund. This scheme gets updated with time, which may influence your purchasing decision, so it is suggested that you must conduct your research properly.  

After this, you will have to decide the way by which you want to purchase the property. There are four different ways by which property is sold in Australia. Those are as follows:  

  • Auction Method 
  • Private Treaty 
  • Tender and Expressions of Interest 

To know more about the methods in detail, head onto the next blog i.e., Different Ways to Buy Property in Australia

Searching for your ideal house gets easier when you know what you need. Give yourself a head start by making a checklist and determining the must-have features for your potential home.  

If you follow this guide, you will surely get a clear idea about what you want with one of the major purchases of your life. You can also contact the best real estate agents offering their services in Narren Warren and the surrounding suburbs.   

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