Wednesday, June 29, 2016

Saving For Your First Home (Guest Post)

Owning your own home is part of the Australian dream. Entering the property market can come with many ups and downs, but regardless of where and when you're buying, the best thing you can do is to put yourself in a good position financially. 
How much can you borrow?
Whether you are a single or a couple, the amount you can borrow will depend largely on your income and your existing financial commitments. With a greater income you have the potential to make bigger loan repayments, but if you already have large loans or credit card debts, these will be taken into account when assessing your borrowing power. Before approaching a bank or mortgage broker, review your finances and establish what you could realistically afford to pay each month. 
Be aware that earning power does not guarantee your eligibility for a home loan. Lenders will look at your credit history, the size of your deposit, your age and financial stability when assessing your loan application. 
To have a better understanding on what to expect before applying, it is advised to use a free loan calculator.
What size deposit do you need?
In the past, a deposit of 20% was required for purchasing a home. Meaning that someone wishing to buy a $500,000 property would need a deposit of $100,000. Lenders no longer look for a deposit of this size, usually requiring as little as 5% ($25,000 for a $500,000 purchase), but there are a few things to consider before rushing in to a 95% mortgage. 
Having a larger deposit means having a smaller mortgage. The more you can save for a deposit, the less you will have to borrow, meaning less to pay back to the bank. 
With a deposit of 20% or more you will avoid paying Lender's Mortgage Insurance, a step lenders take to protect themselves in the event you cannot meet your repayments. 
Having a larger deposit will also help with your eligibility for a loan. Banks can see that you have the ability to save and therefore make repayments.
First home owners grant
You might have heard about the first home owners grant, a form of government assistance introduced in 2000 to help Australians purchase their first home. The nature and amount varies from state to state, and can also change from year to year, so if you are budgeting with the grant in mind, be sure to obtain up to date information on what is available in your state. 
The scheme delivers a one-off grant to home buyers purchasing their first home, who meet all of the eligibility criteria. The grant amount is often dependent on whether you are purchasing a new or existing property, buying land, whether you are buying in metropolitan or regional areas.  
Bear in mind that the grant may not be paid directly to you, but instead paid as a credit against transfer duties. 
Other expenses
You home deposit and size of your mortgage will be front and centre in your mind when planning to buy a house, don’t forget the other expenses that need to be paid as part of the process.
The exact kinds of costs will vary depending on your situation, but some extras include stamp duty, real estate commissions and conveyancing and legal fees, building and pest inspection fees, loan establishment fees, mortgage insurance and building insurance.


  1. how come australia one? u buying in australia ah?


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