resi frst home buyer

Your complete guide to

buying your frst home
NAVIGATOR
resi
frst home buyer
Buying your first home can be exciting, daunting, fun and
stressful, all at the same time. Although many of us have
watched our friends and family go through the process of
purchasing property, buying your own home is a dramatically
different experience because its your own hard-earned
money going towards the single biggest financial
commitment of your life.
The steps to buying your first home arent difficult but,
to make sure you buy the right home for you and secure
the best loan for your needs, you need to know your stuff.
The more you know, the more confident youll be navigating
your way towards home ownership. In this guide, weve
made it easy for you by outlining everything you need to
know about buying and financing your first home.
So, lets get started!
Buying my first home was such an
achievement. When I was finally handed the
keys to my house, instead of feeling weighed
down with the responsibility of a mortgage, I
felt free. It was my house and I could do what
I wanted with it. There were no real estate
inspections, I could paint it whatever colour I
liked and bang in as many nails as I wanted
to for all my pictures. I was in charge of my
own destiny and had the chance to really get
somewhere in life. - Bella, 31
Why do it?
Most Australians aspire to owning their own home and would
do just about anything to achieve it, even of it means a major
lifestyle adjustment. But does it live up to the hype? By all
reports, yes it does.
Paying off a home means you are building equity in an asset
from which you can start to create real wealth. Its free of
the capital gains tax that most other major investments
attract, and over time youll have the option of using the
money youve paid off your home loan as a way to upgrade
to a better home, buy investment properties or otherwise
invest. In the meantime, theres nothing quite like the feeling
of satisfaction and security of coming home when you know
its yours.
1.
1. 2.
At a glance
It usually takes anywhere between 30 days and 90 days (depending on the state you are in) from the time your offer to buy a
property is accepted, to the day the keys are handed over. Have your home loan pre-approved before you start your search
and make an offer, to maximise your chances of success when the right property comes along.
Before you buy
10 Steps to Your First Home
1 Get home loan pre-approved based on repayments you
can comfortably afford.
2 Take your time finding the right property for you - dont
rush into buying something only to regret it later.
3 Make an offer based on what your research tells you
the property is worth and is within your budget.
4 If offer is accepted by vendor place a holding deposit
(usually about 0.25% of the propertys value).
5 Have your solicitor /conveyancer check contracts and
organise building, pest and other inspections to make
sure there are no underlying problems before you
commit to buying.
6 Agree to sale by exchanging contracts and, if your
state requires you to, paying a 5-10% deposit. (This
additional deposit is not required in QLD and WA)
7 Have your lender arrange a property valuation and
formal loan approval and apply for the First Home
Owners Grant, if applicable.
8 Complete mortgage documentation with your
solicitor or conveyancer.
9 Organise building and contents insurance.
10 Settle loan with repayments schedule in place.
Move in and celebrate!
1.Get your budget in order
Buying a property is a big step so be sure to get your
finances in order before going ahead. Making a budget and
sticking to it is a surefire way to save for a deposit. And when
it comes time to start making repayments on your loan, the
more disciplined you are with your money, the easier it will
be. Consistency is the key to success, so keep at it and the
results will come. Nothing is as motivating as progress.
2. Defne the purpose of your purchase
Also think about the purpose of your purchase. Do you want
to buy a home to settle in long term? Is this a purchase you
hope will grow in value so you can sell it and buy again? Do
you want to live in the property and then rent it out as an
investment? Thinking long term will determine the kind of
property you buy.
3. Determine your longer term goals
If you are buying a home in which you want to raise a
family, for example, many of your decisions will be based
on lifestyle. It may be important to buy a property that can
accommodate a growing family or it may need to be close to
childcare facilities and schools or on a quiet street for safety.
In contrast, if you are buying a property destined to become
an investment, your priorities will be different. You may
look for a unit in demand by renters thats close to reliable
transport and shops, for example.
4. Research
Be sure to thoroughly research what kind of property you can
expect to be able to buy in a particular area. You may decide
buying a slightly higher standard of property one suburb
over is the way to go once you know the market better and
be much happier with your purchase as a result. It will also
pay to find out what kind of government concessions and
assistance you are eligible for. Your lender will have that
information handy so dont be afraid to ask questions.
3.
Saving a
deposit
Take the fast-track to save up a
deposit - 5 steps to success
If you have a rough idea of the repayments you can
comfortably afford, the next decision to make is how much
you want to save before taking out a loan. Ideally, you should
try to save 20% of a propertys value as a deposit. On a
property worth $550,000, for example, a 20% deposit would
be $110,000. This simply isnt realistic for many first home
buyers, however. Many lenders will approve loans of up to
100% but you will be required to pay Lenders Mortgage
Insurance which protects the lender in case you default
on your loan.
The cost of the insurance is charged as a one-off premium.
The greater the percentage of the property value you
borrow, the higher the premium will be. The premium can
add thousands of dollars to the cost of a home so save
the biggest deposit you can before buying. On 100% loans,
mortgage insurance can cost up to 3% of the amount you are
borrowing.
1. Get rid of all but one of your credit cards and reduce the
credit limit to $1000.
2. Pay off any debts owing on personal loans and credit
cards by consolidating them into one low-interest loan.
3. Arrange for savings to be taken out automatically every
time you get paid.
4. Sign up for a fee-free, high-interest account to save up your
deposit faster.
5. Prioritise your spending and stick to a budget to minimise
waste and maximise savings.
3. 4.
Show me the money!
Once you are in control of your finances, you should have
a clear idea of what you can afford to put towards your
mortgage repayments. So, how much you should
borrow? The goal should not be to borrow as much as
a lender is willing to agree to, but how much you can
comfortably afford to pay.
It can be tempting to borrow too much when youve fallen
in love with the perfect house that costs a little more than
you were planning to pay. Dedicating a large portion of your
pay to the mortgage may allow you to live in this dream
house but at what cost? Putting too much strain on your
finances is known to be a considerable stress factor in many
relationships. So borrow what you can afford without having
to downgrade on your lifestyle too much.
Be sure to build in some room to move for changing
circumstances too. Interest rates can go up, families can
grow and incomes can change. Expecting the unexpected
could mean the difference between keeping your home and
using it as a tool to create real wealth, or having to sell it
when it gets all too hard to meet those repayments.
Interest rates can obviously have a major impact on how
much repayments are but dont be fooled into choosing the
loan that appears to be the cheapest on interest rates alone.
Advertised interest rates may be short term and a lender
may charge hefty fees to make up for the lower interest
rates it charges.
and what your repayments will be,
check out the calculator at
resi.com.au /calculators
Follow this monthly repayments guide to help you decide how much to spend on your first home.
Note: Repayment calculation is based on a loan over 30 years at standard variable rates which are subject to change.
Repayments are principal and interest repayments and are approximate only.
Interest rate Loan Amount
$200,000 $300,000 $400,000 $500,000
5.0% $1,074 $1,610 $2,147 $2,684
5.5% $1,136 $1,703 $2,271 $2,839
6.0% $1,199 $1,799 $2,398 $2,998
6.5% $1,264 $1,896 $2,528 $3,160
7.0% $1,330 $1,996 $2,661 $3,326
7.5% $1,398 $2,098 $2,797 $3,496
5.
Adding it all up
It isnt just the cost of the home you have to think about when youre deciding how much to spend on your first house.
Its a common mistake for first home buyers to underestimate just how much the extra costs amount to over and above
the price of a home.
4. Lender fees
Fees can vary significantly between institutions and can
include:
Loan application fees
Loan establishment fees
Service fees
Valuation fees
Lenders legal fees
Account transaction fees
Exit fees
Its important to find a balance between interest rates
and fees. Sometimes lower interest rates mean more and
higher fees. Be sure to check your contract to see which
fees are included and hence what the total cost to you
really is.
5. Lenders Mortgage Insurance
Borrowers with a deposit of less than 20% of the propertys
value can expect to pay this insurance, which is a safeguard
for lenders should you default on your loan. Theres no
need to necessarily come up with the money for this,
however. The insurance is a small proportion of your
overall loan and is usually combined into the overall loan
amount. Please note that Lenders Mortgage Insurance
is different from Mortgage Protection Insurance which
insures you against not being able to repay your loan.
6. Moving and set up costs
Be sure to factor in removalists, mail redirection, and
connection of power, gas, internet and phone. Take into
account council, water and strata levies, building and
contents insurance and whether youll need to buy any new
furniture or white goods. Also consider whether the home
has adequate heating and cooling. If not, new insulation,
fans, heaters and air conditioning may be in order. If you
are buying a property not within a strata agreement (such
as a terrace or house), also account for building insurance
which may cost anywhere between $200 and $800 (or more)
depending on the value of your home.
What are all the other costs?
Follow this monthly repayments guide to help you decide how much to spend on your first home.
Note: Repayment calculation is based on a loan over 30 years at standard variable rates which are subject to change.
Repayments are principal and interest repayments and are approximate only.
1. Stamp duty and other
government fees
Reductions on stamp duty are available through most state
governments. In Victoria, first home buyers get additional
state grants and in Western Australia and the Northern
Territory, principal residence rebates are available. Go to our
online calculator resi.com.au/calculators to find out exactly
how much you will need to pay. You can also visit the state
government sites listed at the end of this brochure for the
exact details of the savings available to you as a first home
buyer. Alternatively, your Resi lending specialist will be able
to advise you on the stamp duty and government fees you
will need to pay.
2. Conveyancing / Solicitor Costs
Hire a solicitor or conveyancer to look after the paperwork
involved in the property exchange. Legal representatives will
usually be recommended to you by your lender or real estate
agent. These fees range from about $400 to $2000. Within
this process, the solicitor or conveyancer will also undertake
many searches on your behalf, which may also add a couple
of hundred dollars to your bill. However, many of these
searches can reveal important aspects of the property you
may not have known about in any other way. So its worth
investing in research before committing to such a major
purchase. Your solicitor or conveyancer will let you know the
exact amounts required for your situation.
3. Inspections
A pest report is advisable before you buy to make sure
the property isnt infested with termites, especially those
that cant be seen with the naked eye. Termites can cause
substantial damage over time that can be very expensive
to fix. A building report is also essential to make sure a
property is structurally sound and free of major defects that
may be costly to address once discovered. These can cost
between $200 and $500 each.
5. 6.
The right loan for you
Once you and your lender have figured out how much is sensible for you to borrow, theres one more step before you can
start seriously inspecting properties. Getting your finances pre-approved means you can go ahead and bid at auction or
make an offer in a private sale with the knowledge that you have the money to lock in the deal. Too often, eager home
buyers hit the open-for-inspection scene too early only to face disappointment when they find out their funds fall short of
the mark. Pre-approval for a loan can last up to 6 months and can be renewed on request.
To really get to know the features of your loan and whether its right for you, discuss the options with your lender. It may
cost less to forego some of the loan features on offer, if you are comfortable giving up some of the flexibility that comes
with some of those features.
Here are some of the questions you might like to ask:
1. What are the loans set-up costs?
These vary widely and can be significant so it can pay to ask
up front.
2. What interest rate will I pay given my circumstances?
Different circumstances can affect the rate of interest you
pay. Items such as:
i. Loan size: Some institutions offer a discount rate for loans
of $250,000 or more. This usually comes with an annual fee
and packaged with a credit card and transaction account.
ii. Type of income you earn: There are three groups of
loans available depending on the level of income verification
you have.

A. Full Documentation: (Full Doc Loans)
These loans are the most common and are for people
that can provide full proof of their income. For PAYE
employees, this is usually 6 weeks of pay slips.
For self-employed people it usually includes tax
assessment, tax return and registered ABN for 1-2
years. Borrowers pay the lower relative interest rate
on these loans.
B. Low Documentation: (Low Doc Loans)
These loans are usually for self-employed people who
cannot fully verify their income. They are usually
required to sign a declaration of their income and
have an ABN for at least a year and registered for
GST for at least 3 months. The interest rate tends to
be higher on these loans. You also tend to need a
larger deposit.
iii. Percentage of propertys value you wish to borrow:
Some discounted loans are available for people who have a
deposit of at least 5%. Again, this varies with institution and
will usually still incur Lenders Mortgage Insurance.
3. Whats the difference between the various types of
loans available?
i. Standard variable loan: This is a variable rate loan
where the interest rate changes in accordance
with the cash rate set by the Reserve Bank of
Australia. It is the most common type of loan
and usually has the most additional features such as
the ability to make extra repayments, ability to
redraw these repayments, offset facilities, split loan
ability, repayment holidays and interest-only options.
ii. Basic loan: This is a variable rate loan like the
standard variable loan except that it usually has
a lower interest rate to compensate for its relative lack
of flexibility. It varies between institutions but usually
the loan cannot be split or made interest only.
iii. Fixed rate loan: The rate on this type of loan is
fixed for a set period of time which means it doesnt
change even if interest rates in the market change. It
usually has more restrictions than a variable rate loan
such as limited additional repayments and no redraw.
It usually has an interest-only option available.
iv. Honeymoon / introductory loan: This type of loan
can be fixed or variable. The key element is that it
has a discounted rate for a set period at the beginning
of the loan for 12 to 24 months. At the end of that
period, the rate usually reverts to the standard variable
loan rate or to another higher variable rate. Each offer
and set of conditions varies between lenders.
v. Line of Credit: This is a credit facility where the
amount borrowed is secured against a property.
Your only requirement is to pay the monthly interest
on the amount you use. If you repay that amount
borrowed, you can then re-use it again and again
just like a credit card.
vi. Packaged loans: These are also commonly
known as Wealth Packages or Professional
Packages. They usually include a discount off the
standard variable loan, plus additional financial
products such as a transaction account and credit
card for an annual fee.
7.
4. Can I make the choice whether I pay weekly,
fortnightly or monthly?
Paying more frequently means you can reduce the amount of
interest paid on your loan and pay off your home loan sooner.
Some basic rate loans dont have this facility but offer a
lower interest rate in exchange for the reduced flexibility.
5. Can I switch to interest-only if times are tough?
Most lenders allow borrowers to pay just the interest
portion of their loan for a set period if they are wanting to
temporarily reduce repayments. This is typically the case
with investment properties where the interest portion
of repayments is tax deductible. The goal for an owner-
occupied property, however, should be to minimise the
interest paid by making principle and interest repayments.
6. Can I link an offset account to the loan?
Offset accounts can be a useful tool to fast-track your
mortgage repayments. Any money sitting in the offset
account on any given day is offset against the loan, meaning
you are charged less interest. Depositing your salary into the
offset account and relying on your credit card to pay bills and
expenses before paying it off at the end of the month can cut
years off the term of your loan.
7. Can I redraw any extra money Ive paid into the loan?
Redraw facilities allow you to access any extra repayments
youve made should the need arise. They can often work just
as effectively as offset accounts.
8. Can I make additional repayments?
Additional repayments are amounts paid over and above the
contracted minimum amount. Even small extra repayments
can significantly reduce the total interest you pay on your
loan. Be aware that some fixed-rate loans only allow
minimal extra repayments.
9. Am I penalised if I pay the loan off sooner?
Extra repayments can be made on variable loans without
being penalized. Rate costs will be applicable for a fixed
rate period.
10. Can I take a repayment holiday?
If youve been making higher repayments than you have to
and have built up a surplus in your loan, this feature allows
you to take a break. If theres a new baby in the family, for
example, and you are relying on one income instead of two,
this can help to tie you over during that period.
11. Are there any ongoing fees attached to the loan?
These could be annual fees in return for a rate discount, or
monthly maintenance fees. Its important to ask your
lender about the fees and check your loan documents before
you sign.
12. Can I borrow 100% of the purchase price on this loan?
Not all lenders will allow it on every loan and some charge a
higher interest rate to do it. Deposits of less than 20% also
attract lenders mortgage insurance. It is important to know
your options and balance a higher rate with a lower deposit
to get into your home sooner.
Talk to your lender to asses what
features are important to you and the
most cost-effective way to manage
your loan according to your needs.
7. 8.
The loan process
Step 1 Ask your lender how much you can borrow.
Step 2 Fill out a loan application form by phone or
face-to-face.
Step 3 Conditional approval will be granted within
48 hours.
Step 4 Provide the paperwork to verify the details on
your application form.
Step 5 The lender will organise an independent
valuation on the property you want to buy.
(except for pre-approvals)
Step 6 Formal approval is granted and settlement goes
ahead after the property is selected and the offer
has been accepted.
To help your loan application proceed smoothly and swiftly,
expect to include the following details and documents:
Client details
Completed application form signed by all applicants.
This will include an id verification.
Income
For PAYE earners:
Payslip and/or a letter from your employer confirming
income, position, length of service in the company. This
letter should be on company letterhead, and signed by
an Authorised Officer. Payslips may not be older than
6 weeks.
Copies of last 2 years Group Certificates and/or tax
returns and/or tax assessment notices.
For Self Employed:
Last 2 years full tax returns (personal and business/
company).
Full financial statements for the last 2 years of all
related companies/businesses.
Savings
Copies of all bank statements evidencing deposit funds
for the last 6 to 12 months.
Gifts - A letter is required from the person providing the
cash gift, stating the amount and that it is not repayable.
Your lender will contact you if any additional material is
needed.
9.
Let the search begin
The more research you do before taking the plunge and
making an offer on a home, the more condent you will be
that your choice is the right one for you. Many buyers set out
on a path that changes during the course of their search.
They may plan to buy in one area, only to find another suits
their needs better, or begin with their heart set on a house,
to later decide a unit is the better option. Be prepared to take
detours along the way rather than sticking rigidly to a plan
only by being open to opportunities will the right home
present itself to you.
Once you fall in love with a home, it can be difficult to see
past the positives to any pitfalls the property may have. But
before you start planning where all your furniture will go
and where youll entertain people when they come over for
your housewarming party, try to balance out those emotional
drawcards with some cold hard facts.
Take the time to fill out the Wishlist at the back of this
guide before you start house hunting to make sure you end
up buying a property that meets all your needs. It may be
crucial for you to live within walking distance of the local
primary and high schools, for example, so you can avoid
having to buy a second car. It may not be so important
whether or not the home is located on a busy road if it
means it costs a little less.
Go into as much detail as you like on every aspect of the
homes features, its immediate surroundings such as the
unit block or land size, and its location. If youd love a stone
benchtop in the kitchen, put it in. If you cant live without a
double garage or want a child-friendly garden, write it down.
Just make sure to include everyones wishes who will be
living in the house. Buying a property is usually about trade-
offs. Using the Wishlist will allow you to work out where
youre willing to give a little and where you are not.
When it comes time to attend open-for-inspections, all the
properties you visit can become a bit of a blur and it can be
difficult to remember which property had what. To make
the process easier, weve included an Open-for-Inspection
worksheet so you can keep track of which properties are
open when, and another that makes it easy to make notes
on the propertys pros and cons while youre there. Taking
photos is another great way to jog the memory.
11.
Ask the experts
Buying property involves dealing with real estate agents,
solicitors and lenders probably more than youd like. But
its their job to help you through the transaction so dont be
afraid to ask questions, if you have any.
Ask the agent:
Are there any heritage orders on the property?
Was the property rented or owner occupied? If the house
was rented it has probably been subject to more wear
and tear which could lower its value.
Do all additions/extensions have council approval?
Why is the owner selling? This may give you an idea of
how keen the owner is to sell the property and if they
would accept a lower offer.
How long has the property been on the market?
What is the settlement period? Is the vendor flexible?
What are the current council rates?
Have pest and building inspections been done previously?
Are there any things to note?
If its a unit on company title, can I rent it out?
If its a strata title, what are the current levies? Are there
any outstanding strata issues occurring at the moment?
In addition, if you are in Queensland or Western Australia,
you should also ask the agent:
To include a Finance Clause as a conditions of the
contract (usually 14 days), if finance is required.
To include a Building and Pest Inspection clause
(generally 14 days) as a condition of the contract.
Ask your conveyancer / solicitor:
The key role of your solicitor or conveyancer in the
transaction is to check your contract of sale , undertake
searches, advise on pest and building inspections and to
complete settlement. In some states, they also review
your mortgage documents , co-ordinate the exchange of
contracts and pay the deposit.
Some questions to ask are:
What are the costs of the searches?
What are your charges? Does this include incidental
costs?
Will I only deal with you or others in your organisation
as well?
Except in QLD and WA where it is not applicable, it would also
be wise to ask:
Is there a cost to review the document before making
an offer?
Are there additional costs associated with advising on the
mortgage document?
More research:
Are neighbours planning any extensions?
What have other properties in the area sold for? Compare
the asking price to recent sales in the area and purchase
sales reports to verify the propertys true value.
Property reports can be obtained at pricefinder.com.au.
Your local real estate agent and local newspaper can also
provide this sort of information.
11. 12.
What happens next?
The fnish line
When youve had your offer or bid accepted, its time to
nalise your mortgage, sign contracts and proceed to
settlement.
There are two types of sales private sale and an auction.
A private sale is usually advertised for a set price and the
sale is negotiated through a real estate agent. A holding
deposit of 1% is paid to show the buyer serious about
carrying through with the deal. In most states, you then have
a cooling off period of 5-10 days where you can undertake
your inspections and reports before fully committing to the
purchase. At the end of the cooling off period a further 10%
deposit is required to exchange contracts. In QLD and WA,
there is no cooling off period and the 1% deposit is the sign
of your commitment to purchase the property.
If you buy a property at auction, there is no cooling off period
and you must proceed with the deal. The vendor sets a
reserve price and once bids reach that price, the property is
said to officially be on the market and the highest bidder
buys the property. Contracts are signed immediately and the
buyer must pay a deposit (usually 10%) on the spot.
Pay fortnightly or weekly instead of monthly
Paying more regularly means you repay a little extra every
calendar year which reduces the amount of interest payable
and the term of your loan.
Pay more than you have to
Higher loan repayments can dramatically reduce the cost
of your loan and is a safeguard against rising interest rates.
If you are already paying more than the minimum, any rate
rises will not have as significant an impact on your lifestyle.
Use a windfall wisely
A work bonus, inheritance or tax refund can make a
substantial dent in your mortgage. If you have a redraw
facility, you can always withdraw it in an emergency.
Achieving your goal of home ownership is a rewarding experience, however the process can be all consuming while its in play.
Now you have reached your goal, you have a new one to set to pay your loan off as quickly as you can.
During the period between your offer being accepted
and nal settlement about 6-12 weeks you will
have inspections done on the property and you should
arrange building and contents insurance. Your loan will
be formally approved and your lender will do a valuation.
Your settlement agent (solicitor or conveyancer) will also
examine the contract on your behalf for legal compliance.
If everything is in order, you can then move safely and
condently through to settlement.
Although buying a home may seem to be a complex and
intimidating process, rest assured that thousands of people
go through this process every day and the whole system
agents, lenders, valuers and government departments all
know the role they have to play and in which order things
need to be done to proceed to the next stage.
Make the most of your loans features
If your loan has an offset facility, use it. Any savings
should be directed towards your mortgage, even
temporarily. Interest is calculated daily, so every dollar
counts.
Maintenance
Check in with your lender every 6 months to make sure you
are on track.
Resi is available to lend first home buyers a helping
hand every step of the way. Call your local resi branch
on 136 126 and own your dream sooner.
13.
Wishlist
Cant live without Would love to have Nice but not essential
13. 14.
Open for inspections
Address Time Price Agent details
15.
Inspection notes
Address Agent
Bedrooms Bathrooms Garage Price
Rating (out of 10) Auction or private sale details
Address Agent
15. 16.
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