Buying your first home is an exciting step to take, but it’s not easy to know where to start.
In this article we’ll provide some tips and answer common questions about buying a home. With interest rates still low going into 2022, it might be the time to purchase your first home.
There’s a lot more to buying your first home than just making an offer or bidding at an auction. You need to figure out what you’re looking for in a home and what you can actually afford.
Take the time to research the property market and consider what type of property would suit your lifestyle. Is this a property that you plan to live in for a long time? Or is it just a stop along the way to finding your dream home?
You’ll also want to figure out what you’re looking for in a home loan. Here are some points to consider:
Buying a home will likely be the single biggest purchase you make in your life – and the deposit and repayments aren’t the end of it!
Take note of all the costs of buying a home:
How much money you should have saved largely depends on the price on the property you intend to purchase. Ideally, you want a deposit of at least 20% to avoid paying LMI.
However, for buyers wanting to get on the property ladder sooner, paying LMI may be worth it. Some lenders will approve home loans for borrowers with deposits as low as 5%.
A guide to deposits, pre-approval, & choosing the right property.
Lenders want to see borrowers who can prove that they have good financial habits. So, your credit history will be assessed and they’ll want to see bank statements and payslips that indicate a strong ability to meet repayments.
Before you start house hunting, it’s a good idea to know how much a lender will let you borrow. This way you can avoid wasting time looking at properties that you can’t afford.
Your borrowing power refers to the loan amount that a lender will likely approve you for. It’s based on your financial situation, and the higher your borrowing power, the more trust lenders have in you to repay a larger home loan.
Remember that just because a lender is willing to loan you a larger amount of money, you don’t have to take it. If you’re happy with a modestly-priced home, don’t feel tempted to splurge just because you can.
Borrowing power is affected by your:
Click here to find out how you can increase your borrowing power.
Calculate your borrowing power based on your income.
Now that you’ve familiarised yourself with the nature of home loans and property buying, it’s smart to look into specific home loan products.
You can easily compare home loans from over 35 different Australian lenders using Lendi’s platform. We’ll ask you a few easy questions about your financial situation and what you want in a home loan so that we can provide you with a shortlist of home loans (and interest rates) that you are more likely to be suited to.
Our Home Loan Specialists will be on hand to answer your questions and guide you through the online application process, if you find a loan you’d like to apply for.
Lenders Mortgage Insurance (LMI) is often charged by lenders when a borrower is wanting to borrow over 80% of the property purchase price. That is, their deposit is less than 20% of the property purchase price.
LMI is meant to protect the lender in the event of a borrower being unable to make repayments.
LMI can be costly, depending on a range of factors including:
However, sometimes it can be worthwhile to pay LMI if it means you’ll get on the property ladder faster.
For example, in many parts of Australia, property prices are rising. It is possible that your rate of savings may not be on par with the rate of property value growth. So, you might not be able to keep up if you delay buying and you could end up having to fork out more for your preferred property or settle for something cheaper.
See how much you might need to pay if you're low on a deposit.
Did you know that there are a number of grants and incentives offered by the government available to help support eligible first home buyers?
Most of these schemes are exclusively for first home buyers and include grants like the First Home Owner Grant, schemes to help grow your deposit like the First Home Super Saver Scheme, and stamp duty concessions.
It’s worth checking to see if you’re eligible for any of these schemes because they could save you money and help you become a homeowner sooner.
Buying a home is expensive, especially in some parts of the country. Unfortunately, many prospective homebuyers can’t afford to buy in their ideal location.
If this sounds like you, but you still want to own property, you might like to consider rentvesting. Rentvesting is where you buy an investment rental property in a location that you can afford while continuing to rent in your preferred suburb.
This way you generate rental income and possibly equity, while being able to maintain your existing lifestyle. You can even consider investing in property in another city or state. Property managers can service the rental property while you benefit from afar.
Whether you’re ready to buy your dream home or start rentvesting in 2022, Lendi is here for you. Our Home Loan Specialists can help you explore your mortgage options.
We're here to help. Get free expert advice at a time that suits you. Choose a time to chat with a Home Loan Specialist here
The information in this post is general in nature and should not be considered personal or financial advice. You should always seek professional advice or assistance before making any financial decisions.
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