Buying a home is a significant moment in life. Yes, it is thrilling, but it can be easy to get caught up in the rush of it all. We’ve listed some of the common mistakes first home buyers make. 

1. Not giving it enough time

It takes time and effort when looking to buy your first home. Preparation begins by assessing your financial circumstances and you may also need to think about your family’s requirements (schooling, sports clubs, and access to public transport). Then, take into account personal factors such as future career goals and aspirations – would your new home be good enough to accommodate individual needs and dreams?

If you are a couple, you may wish to consider a growing family and its unique needs. Giving your own unique circumstances sufficient thought and time helps you steer clear of some of the common mistakes in buying your first home.

2. Check out the neighbourhood

When you buy your home you’re not just buying four walls – you’re also essentially signing up to the surrounding area.

Every locality has its own unique set of characteristics and trends. There are specific qualities of schools, demographic factors, crime levels, access to public transport, traffic congestion, and expansion plans.

Houses bought in a hurry, looking mostly at the investment value, tend to ignore these underlying factors which could affect your home’s future value. It is as important to research the neighbourhood as much as you investigate your property.

3. Plan your finances

One common mistake is when new homeowners do not go through their finances in sufficient detail. Getting your maths right could set you on the path to having your loan pre-approved.

Think of your personal assets and debts like the balance sheet of a company – count your grantassets and evaluate your liabilities. This is what lenders do when you approach them for home loans.

4. Mistakes in First Home Owner Grant (FHOG) applications

Eligible new homeowners could get support from state and territory government grants – these vary in amounts based on your state of residence. These grants are usually subject to terms and conditions and caps in terms of purchase prices as well as the amount of grant available for new homeowners.

These conditions can leave room for mistakes. Things like not making the property the principal place of residence of the applicant or advising when circumstances change, not disclosing the name of your domestic partner or spouse, failure to disclose receipt of a prior grant by the domestic partner or spouse, or purchasing the property in a child’s name while the payments are made by parents.

It is important to seek the right advice and be sure to read through and be clear about the terms and conditions associated with First Home Owner Grant (FHOG) applications to avoid these common mistakes when buying your first home.

5. Misreading the market

When you buy a home, looking into various markets is essential. However, reading too much into market fluctuations can be the source of your downfall.

Sometimes, information available in the media could give out conflicting signals and may not necessarily reflect market realities. You should also be aware of short-term fluctuations that may be different from long-term trends.

One way to see through these fluctuations and conflicting symbols is to be an avid watcher of the housing market. If you want to be sure that you aren’t misreading the market, it’s a good idea to have a broker working for you.

6. Overshooting your budget

Budgeting and planning finances is nothing short of an art form. However, budgets invariably tend to be overshot, not because of your inability to foresee the future, but because you could easily fall in love with your own home.

As you get involved with your own project of looking for a home that you hold close to heart, you could be tempted for an upgrade to your dream home (and a stretch of the budget).

Going beyond your borrowing limits means exposing yourself to financial shocks and insecurity. So kick in your willpower, and stick to that budget.

Is it your dream to live in your own home? Buying your dream home is an exciting new beginning into the next phase of your life. But it also comes with responsibility – in planning for it over many years, and in saving for a home deposit. There are major decisions to be made and you may need to adjust your lifestyle to achieve your goal. 

You’re going to need a game plan – it’s time to hustle and think strategy. Here are some steps you could take that could ultimately add up to managing your finances and saving enough to start the buying process.

Kick things off with a clear budget

Planning for your home without a budget is like travelling to a new state or territory without a GPS – you need to know where you are, what your destination is, and how you are going to get there. Budgeting is an important part of starting your journey to owning your own home. 

A good budget lets you know how much you spend, plan your savings goals, and strike the right balance between your savings goals and your spending needs. You could start off with a budget planner, which lets you translate your goals into actionable plans, giving you clarity on where you stand and where you would like to be.

Calculate your mortgage

Home loans come in all shapes and sizes, such as variable rate loans, fixed rate loans, line of credit, interest only loans, guarantor loans etc. Use of a mortgage calculator lets you have a clear idea of how much your mortgage repayments could be, the amount that you could borrow, and identify ways to repay your loans faster. And more importantly, you may be able to make up your mind on the kind, size, and location of your planned property when you put pen to paper and calculate your mortgage.

Know the property market

Saving for a home deposit starts with knowing what is happening in the property space, how things may shape up over the months and years ahead, and what could be in-store in terms of expenses and outlays. Knowing the pulse of the market well ahead of your planned purchase helps you make informed spending and saving decisions. So research different areas and subscribe to real estate news and you’ll be on your journey from novice to expert in no time.  

Open a dedicated savings account

You may have a separate transaction and savings account as part of your regular banking, but it is a good idea to open a savings account specifically towards saving for your home deposit. A home deposit is a considerable part of your savings, and it takes time and deliberate action to build your savings up to what you would want to invest as your home deposit. 

Your home deposit is typically 20% of your home purchase price, and you’ll also need enough to cover ongoing costs required with your home purchase. Having a bigger deposit is ideal, as this would bring your loan-to-value ratio (LVR) lower, bringing your overall costs down significantly. Having a dedicated savings account for home loan and deposit purposes makes sure that you do not mix up your spending and savings accounts, and you could be better able to keep your spending within your means.

Leverage your car

A car is an expensive investment high on running costs including registration, insurance and maintenance, and also tends to be high on depreciation. Why would you want to increase your spend on a depreciating asset when you would rather save for your home deposit?

With one car, you stand to gain both ways – apart from channelling your cash flow onto your home deposit, managing with your better half on the same car makes for an opportunity to spend some quality time together.

Save on your rent

Now that you have made up your mind to move to a place of your own, you may as well consider if short-term compromises on your temporary abode could make you richer for the home that you buy!

For instance, it could be a shift from a $450 home to a $350 apartment, or probably a move from your favourite locality to a suburb with less housing demand. Remember, you are progressing on your path to owning your dream home, and some sacrifices for the moment may well be worth it when you look back from your own property that you have worked so hard for!

Buying your first home? The numbers can be scary, that’s for sure. But while the kinds of figures involved are intimidating, knowledge is power. And if you get your head around the basics, you’re most of the way there.

A good place to start is running some numbers using our online calculators. We have 15 different online calculators to help you see where you stand including calculators to determine borrowing power, repayments, loan comparisons, principle and interest and stamp duty.  

Remember that our calculators can only provide rough estimates, so you will need to talk to a Loan Market mortgage expert as well to nail down the exact amounts.

 

Number Crunch 1: How much can I borrow?

Knowing how much you can spend on a property is crucial and it’s easy to find out. Punch in your income, expenses, the number of dependents you have and a few other details, and you’ll soon know your borrowing power.

There are a number of factors which determine your borrowing power, but your income is right up there at the top. So it’s vital to work out how much you can realistically afford, based on your monthly income.

 

Number Crunch 2: What will my repayments be?

Everyone wants to know this one! After all, this is the amount you’re really going to feel. To find out, click here, then enter the loan amount, period and type and the interest rate amount. The calculator will then spit out your monthly, fortnightly or weekly repayments.

Repayment options may affect how much you pay for your home loan and for how long, so it’s important to look for the most favourable repayment options you can get. You ideally want to pay the principle off as quickly as possible so you would want a principle and interest loan, rather than an interest-only loan.

You would also ideally want a loan that allows you to make extra repayments whenever you can without penalty, so you could pay the loan off even faster.

 

Number Crunch 3: How much stamp duty will I pay?

Don’t forget about stamp duty. It actually varies from state to state, so it can be hard to know exactly how much money to set aside. Jump into our calculator, select your state, answer a few questions about your property use, confirm you’re a first home buyer and enter the property value and loan amounts. You’ll then know the government fees you’re up for (including stamp duty) and if there are any concessions you can apply for.

Other fees you may be liable for can include;

There’s a lot to know about loans, especially if you’re taking one out for the first time. So let’s look at some of the common questions, which hopefully will be some of your own.

How much can I borrow?

The answer to this one is ‘Depends’! It differs from lender to lender and can vary quite a bit depending on their criteria. When asking how much you can borrow, you need to consider how much you can afford to pay back, because this is what a lender bases their decision on. They will look at factors such as your assets, your income, your savings, your deposit and the value of the property to ascertain whether you are a good risk to pay back a loan.

How much deposit do I need?

Again – depends! It depends on how much you want to borrow. If you’ve got a fair chunk of the deposit already saved, your mortgage broker may negotiate a lower interest rate for you. Generally, most banks want 3%-5% ‘genuine savings’ – that’s regular savings in your bank account for at least three months.

You should aim to have at least a 20% deposit when applying for a home loan, otherwise your lender may require Lenders Mortgage Insurance (LMI) to be included with the loan. This is insurance that covers them if you default on your loan and it comes out of your pocket not theirs, so aim to avoid it if possible.

What’s the length of a mortgage?

How long is a piece of string? The most common length is 30 years, however the shorter your loan period, the higher the loan repayments.

How is interest calculated?

Your bank will take the outstanding loan amount at the end of each business day and multiply it by the interest rate that applies to your loan, then divide that amount by 365 days (or 366 in a leap year). It will then charge the interest to you monthly.

Why do I need a conveyancer or solicitor?

Their job is pretty important and includes:

What types of loans are there?

There are a wide variety of different loans, with the major types of home loans being;

How much deposit do I need? Should I go it alone or use a mortgage broker? How do I know if I’m buying the right property?

For many people, buying a property for the first time can be like taking a step in the dark. There are a lot of different factors to consider and it can be tricky to know where to start.

So to shed some light on your journey, we thought we’d offer these three useful tips to help you get your first home wheels in motion.

1. Consider a mortgage broker

A mortgage broker can help to simplify the borrowing process for you. A home loan specialist, a mortgage broker has extensive knowledge and experience with borrowing from different types of financial institutions and often has access to lenders and loans not normally available to everyday borrowers.

As well as offering you a variety of loan options, a broker can help you select the loan that’s right for you and also manage the process through to settlement, including negotiating on your behalf with banks, credit unions and other credit providers.

Did I mention that they come at no cost to you? 

2. Bigger is better!

It’s no secret, the bigger the deposit the better, but mapping out a savings plan and having some financial discipline will take away some of the pain of saving. Typically, the lender looks for a deposit of 20% of the property value. Having this amount or more will maximise your chances of being approved and it means you won’t need to pay for mortgage insurance.

Lenders Mortgage Insurance (LMI) applies when the borrower has less than 20% deposit and is a form of insurance that protects the lender from you defaulting on your loan. It can be quite expensive, so it’s a definite advantage to come up with a suitable deposit if possible.

Ways to accelerate your savings for a deposit could include creating a budget and sticking to it, working more overtime, getting a second job, postponing your annual holiday, foregoing some of those little luxuries like gym membership or restaurant meals, using public transport instead of your car and even moving in with family to save on rent. You should also investigate the grants and concessions available to first home buyers to determine whether you are eligible.

3. Know the property

If you’re buying an existing property, you’ll need to do some thorough research to find out as much as you can about the condition of the property to avoid any problems or additional costs later on.

This may include examining copies of any previous property inspections (the agent must supply these to a potential buyer if asked). You should also visit the property to inspect it in person and commission a property inspection report of your own.

A professional inspection report will tell you the condition of the property and alert you to any pre-existing issues such as termites, leaks, asbestos or structural damage, which could save you thousands of dollars down the track.

Always use a qualified person such as a builder, surveyor or architect to do your inspection reports, as they can spot faults and problems that might not be apparent to an untrained eye.

When you visit the property yourself, check everything you possibly can in the time available. Look for things like sticking windows and doors, signs of damp, sagging ceilings, low water pressure and electrical wiring problems, keeping in mind that anything you find can potentially be used to negotiate a lower buying price.

You’d think a loan was a loan, wouldn’t you? But there are actually a surprising number of different kinds and the one you end up with can depend on a range of factors. These can include the risk you pose to a lender, the deposit you have and how much control you want over your repayments.

So if you’re considering a loan, it’s worth running your eye over our little cheat sheet, as it can help you to choose the one that’s right for you when the time comes.

Variable rate loan

The interest rate varies over the life of the loan. If interest rates rise, you pay more, and vice versa.

Fixed rate loan

This is the opposite of a variable rate loan. Your interest rate and repayments stay the same, no matter what. No surprises.

Split loan

This offers the best of both worlds — you’re able to manage the risk of interest rate fluctuations by making part of your loan fixed while taking advantage of depreciating rates by making part of your loan variable.

On the upside, you can make unlimited extra repayments on the variable portion to reduce the size of the loan faster, but on the downside, you may pay additional fees such as account keeping costs on both fixed and variable components.

Packaged loan

Professional packages offer discounts on standard variable and fixed rates, the waiving of fees and in some cases, great deals on other products from the same lender. To be eligible, you’ll need to be borrowing over a certain amount, have the right type of loan and have a low LVR (Loan to Value Ratio).

Just make sure the joining or annual fees aren’t higher than the savings you’ll make and that the amount you’ll need to borrow is not greater than you can actually afford.

Low-doc loan

Designed for people who have trouble getting the necessary paperwork together for a full documentation home loan, this is a great option if you’re self-employed or own a small business.

To be approved, you’ll need to present your application in the most favourable way. This means only providing the documents requested, as any partial evidence of income may require the lender to request full documentation from you. Also, you may be required to pay higher interest rates, a larger deposit and Lenders Mortgage Insurance.

Introductory rate loan

Also known as ‘honeymoon’ loans, these offer a low interest rate for a short period, after which the rate moves to the standard variable rate.

This type of loan can have either a fixed discount rate (a variable which moves with the market at a fixed level below the standard variable rate) or a discounted fixed rate (a fixed rate that doesn’t move for the entire introductory period).

Bridging loan

If you already own a property, this is a short-term loan that can help you finalise the purchase of new property before you’ve sold your existing property.

It can have either a fixed or variable rate, but usually has a 6 month loan term and a higher interest rate, if you don’t sell your property within this time frame. For this reason, it’s important to be sure you can afford the repayments of both loans.

Line of credit loan

If you need easy access to cash for renovating or investing consider a line of credit. It lets you draw against the loan balance up to a credit limit set by the lender. Interest is added each month and repayments are not required as long as the loan is within its credit limit.

The downside is that if your financial discipline is poor, this lack of requirement to pay anything other than interest could mean you never actually pay down the loan principal.

Refinancing your home loan could save you money that would otherwise be spent on interest. Making the right move at the right time could maximise your savings, but how do you know when to refinance? Read on to learn the basics and find out how to make a right decision about the future of your home loan.

 

Is it time to refinance your home loan?

Well, it could be easier than you think. Refinancing could potentially take years off your home loan term and possibly save thousands of dollars in the process. However, you need to get your timing right; refinancing your home loan at the wrong time may end up driving up your costs.

Refinance with a good credit rating

If you have a good credit rating, it might be a good time to think about refinancing your home loan. Most loan applications involve a thorough credit report check by your potential lender, and home loan refinancing is no exception. Not sure what your credit rating is? Let’s talk and we can help.

What is a credit report?

Basically, it’s your credit history. This includes information about your existing credit and types of credit, if you have made credit card repayments on time, how many applications you have made, and if you have been involved in serious infringements.

A good credit score boosts your chances of landing a loan. On the other hand, if you’ve got a fair bit of debt hanging around you may want to pay that down before you refinance your home loan, as you could stand a better chance of succeeding in your application then.

Consider a lower rate, but compare the exit fees

It’s easy to be attracted to lower interest rates for obvious reasons – it makes sense to switch over to lower interest rates which could save dollars. However, you need to do the math to see if the switch is worth the cost. This includes exit fees, depending on your lender and where you’re up to with your loan repayments. Hint, we can help you calculate if refinancing is worth the cost.

 

Review your home loan regularly
Remember that the world of interest rates is constantly changing, and you need to keep reviewing your home loan on a regular basis. The good news is, we’ll work with you to check on this annually to make sure your home loan is working hard for you.

Keep in mind, this is not to say that you need to keep refinancing your home loan every couple of years – you should be mindful of the costs involved in switching loans, and refinancing all the time could cost you much more than what you could gain. Watch out for the right opportunity and stay in touch!

Is now a good time for you to refinance your home loan? Get in touch today to find out more.

It can seem simpler for homeowners (like you) to stay put when it comes to your home loan however for those willing to look around, there can be a lot to gain. We’ll look beyond the refinancing myths so you can take it out of the too hard basket and reap the benefits.

 

Myth #1: Refinancing is too complicated.

Myth busted! While you may need to get a few ducks in a row to keep you on track to refinance your home loan, we’ll help do the legwork.

 

Myth #2: Refinancing is not for me!

Refinancing your home loan is not something reserved for just a few people – if you have a mortgage, you deserve a better deal. For many homeowners, it can feel too hard and time consuming to figure out if refinancing your loan is the right option. Well, that’s where we can help, a mortgage broker could review your home loan to understand your options and to see if there’s something more competitive out there for you.

 

Myth #3: You don’t save much with interest rates just 0.50%p.a. lower.

Let’s take a look at the figures:

Refinancing your home loan is not something reserved for just a few people – if you have a mortgage, you deserve a better deal. Imagine if you decided to switch from a 5.50%p.a. interest to an interest rate of 5.00%p.a. on a $500,000 mortgage over 30 years. The difference in interest rate is just 0.50%p.a., but that could mean a reduction of close to $55,000 over the life of your home loan, which could be over $150 saved every month – hello savings!

Now, before you jump in, don’t forget to factor in other things like additional features, flexibility and annual fees on your loans. 

 

Myth #4: Fixed rate home loans are not eligible for refinancing

We think this myth might come from the term “fixed” rate – “if it’s fixed, it can’t be changed”! But fixed rate doesn’t actually mean your home loan terms have been set in stone – what it really means is that your current mortgage is set at a fixed interest rate and there’s normally a fee to pay if you want to break the mortgage within a certain timeframe.

If you have a fixed rate, a mortgage broker will help you weigh up the costs to see if refinancing is the right option for you and your current situation. 

 

Not sure if now is the right time to refinance? Get in touch and I’ll walk you through the steps.

It is every homeowner’s dream to buy their own home and keep it looking good. The big worry is always the cost – home renovations can be expensive, and the cost of borrowing money can be very high. That’s why it pays to explore refinancing as an option for getting the money to renovate your home. Here are a few options you could consider: 

 

Home equity and renovations

Your home tends to be your biggest asset. Provided you’ve been paying off your mortgage you could leverage it to get your home renovation done. Given that a standard kitchen renovation could cost as much $40,000 (ouch), home renovations don’t come cheap.

Refinancing your home loan gives you the chance to use your home’s equity to access the money you need for your home renovation. The way this works is you’re given a line of credit based on the value of your home and on the amount of your mortgage you’ve repaid. This is calculated using a ratio called the loan-to-value ratio (LVR) – the ratio of your home loan to the market value of your home.

As a general rule of thumb, lenders tend to be willing to lend you up to 80% of your home’s LVR. You’ll probably need to get a valuation done on your home since the value of your home is not fixed and has probably changed since you first got your mortgage. We can help organise a valuation for you.

One thing to keep in mind is that different lenders operate in different ways and valuations are no exception; some lenders might estimate the value of your home based on what it would be after the renovation is done, which could turn out in your favour. It pays to get a mortgage broker on your side so you have help figuring out the the pros and cons associated refinancing to tap into your home equity.

 

Construction loans for home renovations

Construction loans tend to be used to build new homes, but if your renovation involves structural renovations like construction, changes in foundations or supporting walls, or replacements of wiring or plumbing structures then you could try for construction loans. Construction loans can be helpful if you’ve not built up much equity in your home.

Like with anything there are some hoops to jump through; you’ll need to have council-approved building plans and regular valuations done throughout the process among other things. Generally, your lender is also involved as you renovate, monitoring the progress of each stage before they release more money. Plus, since the money is released in installments and not in one big payment, the amount of interest you pay is limited to the amount of money that has been released for construction.

 

Choosing the right loan for renovating your home

If you’re not down with accessing your equity or getting a construction loan you could look at a personal loan or using your credit card for home renovations, but given the typically higher interest rates on these this could turn out to be a seriously expensive option.

As a general rule of thumb, you could consider accessing your equity for a line of credit if your renovations are cosmetic. Cosmetic renovations are the type that make your home look good – a facelift really. This could be installing a new kitchen or bathroom, changing the flooring, or adding an new paint to the inside or outside of your home.

Construction loans could fit the bill for renovations that alter the structure of your home and for those that require council approvals. These type of renos tend to involve more time and money, plus they tend to need a lot more labour.

 

Which renovations add the most value to your home?

One of the most popular renovations that adds value to your home is a kitchen renovation. Modular kitchens are up there as one of the favourite options for giving homes facelift since they tend to be cost-effective and don’t need extensive labour to install.

Bathroom renovations are also good ones to consider especially with extra bathrooms tending to add value to a house’s sale price. A modern bathroom could change the face of your home and set your home up nicely for future buyers or tenants.

Painting your house’s interior and exterior is another popular way of boosting your home’s value. Updating your house colour from an 80’s salmon pink to a modern colour can go a long way toward how your home looks to prospective tenants and buyers.

Whatever your choice of renovation, you’re going to want to start off by thinking about a plan for what will add value to your home. A well planned budget and the right choice of financing could be what sees your renovation succeed.Get in touch today so we can help make your dream renovation a reality.

For some time now the property market has been ultra competitive. There’s no doubt that it’s extremely challenging for people, even with two incomes, to save up enough money for a deposit, especially in our capital cities.

We’ve got you covered with some benefits to buying in an area that’s more affordable and could offer good rental returns. This means, you could continue to rent in the city you love and get your foot in the property market door in another area. 

Let’s check out the benefits; 

Having the option of buying outside of capital cities means that you could be more open to more opportunities. How? If you can’t afford a home loan of $800,000 to $1M or more then you could look at areas that offer cheaper real estate outside of the capital cities. Plus, you could get the added benefit of getting an income from your property, which could cover your mortgage repayments or the rent you’re paying in the city.

With record low interest rates, you can pay off an affordable mortgage faster. By paying back more than the minimum repayment – and remember that the rent you’re receiving from your investment can go towards your mortgage – you can not only pay off your debt faster, you can shave thousands of dollars off your mortgage.

An added benefit is that it helps you build equity in your property if you do have the goal to expand your investment portfolio or buy where you’re living in the future. The reality is that the regional areas on the outskirts of capital cities don’t generally experience the price growth of the city, but if you hold onto your property and think longer term, you will see price rises. Think of it like a bad haircut – if you’re patient, it’ll grow. And that growth will contribute to your equity.

Property investment 101 is to know your marketplace and it’s important to do your research before buying anywhere. If you’re considering your options, speak to us today and be sure that your decision is the right one.