What you need to know before buying your first home

If you had a roadmap for life, buying your first property would fall somewhere around getting married and having your first child. You spend hours upon hours researching up on the first two, so it only makes sense to do a bit of homework on this one, too.

If you’re anything like the average Aussie, you can’t wait to crack into the property market and buy your first home.

And not without reason. Property in this country is not just a home. It’s a secure, long-term investment with clear financial returns.

But before you dive head-first into the property market, it pays to do a bit of due diligence.

Here’s a checklist of what you should always consider before making one of the biggest financial decisions of your life.

First-home-buyer’s grants

Depending on your circumstances, and what state you’re looking to buy property in, you may be eligible for one of the following first home buyer’s grants:

– Queensland and South Australia offer $15,000 to first-timers buying or building a new home. (maximum value limits apply).

– NSW, Victoria, Tasmania and Western Australia offer a $10,000 grant for the purchase or construction of new homes (maximum value limits apply). Also a $20,000 First Home Owner Grant is available to applicants in regional Victoria.

– ACT offers grant of $7,000, while the Northern Territory makes $26,000 available to eligible applicants.

Stamp duty concessions

Stamp duty, which is a tax that is levied on documents, is one of the biggest upfront costs when buying property. Fortunately for first home buyers, many states offer a partial or full concession:

NSW: Exemptions offered on new homes valued up to $650,000, and concessions for homes valued between $650,000 and $800,000.

Victoria: Exemptions on new or established homes valued below $600,000, while homes priced between $600,000 and $750,000 also offer stamp duty concessions.

Queensland: Offers a stamp duty concession of $8,750 for homes up to $504,999.99. For homes between $505,000 to $549,999.99, concessions of ranging between $7,875 and $875 apply.

WA: Exemptions and concessions are available when purchasing homes valued at less than $530,000 and vacant land less than $400,000.

NT: Offers a full stamp duty concession to first home owners on the initial $500,000 value of the home, which equates to stamp duty savings of up to $23,928.60.

ACT: A flat $20 fee for properties priced $455,000 or less. An extra $13.60 for each $100 increment for homes up to $585,000.

Tasmania and SA: No first home buyer concessions

Allow for interest rate rises

You may have seen in the news recently that The Reserve Bank kept official interest rates on hold at a record low of 1.5% for the 18th consecutive meeting, the equal longest run since the bank’s independence.

There’s only one way for them to go from here: and that’s up.

In fact, Reserve Bank of Australia governor Philip Lowe is already urging borrowers to prepare for interest rates to be lifted as the economy improves.

“The last increase in the cash rate was more than seven years ago, so an increase will come as a shock to some people,” Dr Lowe told an audience in Perth on Wednesday.

ASIC has a handy calculator that can help you determine how much a potential interest rate rise will cost you. Also, it may also be worth considering locking in the interest rate while you can.

Location, location, location!

When you buy your first home, you may want to make sure it’s in an area that will yield strong rental returns… So make sure you do your research.

Also, an investment property is only a good investment if it delivers you a return, so when selecting a place to buy, you need to be confident it will increase in value.

Research the neighbourhood to get an understanding of current price trends, and to see what’s on the cards – roadworks, public transport changes, business or residential developments – which could affect its value in the future.

The type of property

Sure, it’s nice to picture yourself in a giant four bedroom inner suburban home, but you need to be realistic when it comes to your mortgage repayments – especially with interest rates tipped to rise.

Try and live within your means for your first home and then leverage off it later.

If that means considering a smaller inner city apartment, or a modest home in the outer suburbs, at least you’ll be able to afford your repayments if things get tight.

Lifestyle considerations

While it’s nice to crack into the property market, you don’t want it to come at the expense of literally everything else in your life.

When you’re crunching the mortgage sums, sure, make sacrifices, but ensure you still have enough to live comfortably.

ASIC has a budget planner that can assist in this area.

You also need to be sure you have enough money left over to reach your other important short and medium-term financial goals, such as paying off a personal loan or investing in education.

Compare different mortgage options

An investment property brings various potential tax implications so it makes sense to shop around for a mortgage that minimises your tax obligations, and maximises your capacity to achieve other life goals.

All too often people simply go to the bank they have their savings account with, and get ripped off in the process.

This is where we come in.

We have an in-depth knowledge of the lending options that will be available to you, and will act as a middleman on your behalf when dealing with potential lenders.

We won’t stop until we’re confident that we’ve secured a great loan that best fits your needs.

Still unsure?

We understand that taking the leap into the property market can be daunting.

So if you’re still not sure about what you need to consider before signing the paper work, come and have a chat with us.

We’d be happy to talk through your options to help ensure your investment pays off.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

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