Buying a home
Home sweet home
Buying your first home is both exciting and nerve-wracking. It
is a major decision that takes planning and research, and careful
budgeting. Here are some tips to help you get started.
Are you ready to buy?
You are ready to become a homeowner if you have the following
things in place:
- A substantial deposit - The bigger the better
when you're saving for a home. A deposit
of 20% of the purchase price plus enough to cover costs
is ideal. The bigger your deposit, the lower your loan to value ratio (LVR). This is the
amount of the loan divided by the purchase price (or appraised
value) of the property. If your LVR is higher than 80%, you
will need to pay lender's mortgage insurance, and the
lender could charge you a higher interest rate. Avoid these extra
costs by saving a bigger deposit to lower your LVR.
- A regular savings habit - A history of regular
savings in your bank account and a solid track record of
employment will make it easier for you to get a home loan.
- Pre-approval for a loan - Compare a few
different loans before you decide. Ask your lender for a key facts sheet on each home loan so
you can compare more easily. Once you choose the loan and have
been pre-approved you'll know what the repayments will be and
how much you can afford to spend on a property.
- Some additional savings - These will act
as a buffer if interest rates rise and your repayments increase.
Alternatively choose a loan that allows extra repayments so
you can build a buffer early on.
Case study: Jane's dream comes true
partner and I had been renting forever and could see house prices
getting higher and higher - plus we weren't getting any younger. We
decided to bite the bullet and for 4 years we saved every cent we
could until we had a big enough deposit to get away with the
smallest possible mortgage.
'We found a rundown house in a great street and it has become
our labour of love to make it our dream home. Our plan is to put
extra money into our mortgage so we can pay it off in 15
Struggling to get into
the property market?
Widen your property search
Not everyone can afford to live in their ideal location. If
you're trying to get a foot in the market consider moving out of
your comfort zone into an area you may not have considered
Areas further out from cities or towns can be good value for
money and offer a great first step into the market.
Risks of land banking
Land banking is a real estate investment scheme that involves
buying large blocks of undeveloped land with a view to selling the
land at a profit when it has been approved for development. Land
banking may be appealing to investors who are trying to get into
the property market but there are many risks with this type of
investment. Find out more about land banking.
Consider a smaller property
If you really want to live in a particular area you may have to
start small and work your way up. Consider an apartment or a
smaller house that you can add to over time.
Compromise on finishes
Properties that are dated or in need of renovation can be a
cheaper option for home buyers. Look for a home that is
structurally sound and then clean it to your standard. Add a lick
of paint here and there to improve the look and renovate as your
Consider an investment property rather than living in the
Investment properties outside capital cities or in smaller towns
or rural areas can have decent rental yields, making up for much lower capital gains.
The benefit of a positively geared property is that a tenant
repays your loan while you build equity. This allows you to sell
the property later and use the proceeds as a deposit on a property
closer to where you want to live. Find out more about property
How much can you afford?
A good way to find out how much you can afford to spend on a
property is to review your household budget. If you don't already
have one, use our budget planner to:
- Take what you're currently saving toward a deposit
and add in what you pay in rent, to work out how much you
can afford to repay
- Work out how much you can comfortably afford to borrow without
stretching your budget too far, making sure you have a
Include all the costs that come with home ownership: up-front
costs like stamp duty and legal fees and lender's mortgage insurance, as well as
ongoing costs like land and water rates, house and contents
insurance, and repairs
Stamp duty calculators
One of the bigger upfront costs you may have to pay is stamp
duty or transfer duty on your property. Find out how much you will
need to pay using calculators on the websites below. If you are a
first-home buyer, check what stamp duty concessions you are
entitled to in your state.
ACT - Revenue Office:
NSW - Office of State
Revenue: Calculator - for land and property transfers
Department of Treasury and Finance: Stamp duty calculators
QLD - Office of
State Revenue: Transfer duty calculator
SA - RevenueSA
calculator: Stamp duty on conveyances
Department of Treasury and Finance: Property transfer duty
VIC - State Revenue
Office: Our calculators
Western Australia - Department of Treasury and Finance:
Finding the right
There's no point looking for a waterfront mansion if you can
only afford a boatshed. Once you've set your price range, identify
the suburbs that have properties in that range - it will save you a
lot of legwork. Go to the Australian
Property Monitors: Home Price Guide to see property prices in
Then comes the fun part: finding the house or unit you want.
Take your time and consider things like proximity to schools,
transport and amenities, and the condition of the property. Does it
need major repairs?
Before you buy, arrange for building and pest inspections, and
have the contract checked by a conveyancer or solicitor before you
sign. Make sure the person inspecting your future home is qualified
to do so, such as a licensed builder, architect or surveyor.
In some states you can also have inspections during the
'cooling-off period', or the 5 days after you sign the contract, as
long as you don't buy at auction - where there is no cooling-off
period. If you withdraw during the period you will lose part of
If you plan to buy a property as an investment, rather than a
home to live in, read our information about investing in property.
Steps to buying a property
The process for buying a property is slightly different in each
state and territory. For detailed information visit the fair
trading office for your state.
Buying a home for the first time can feel like a
giant leap into the unknown, but there are plenty of things you can
do to make sure you don't fall into a financial abyss. Keep to your
budget, put some money aside for emergencies, and take your time to
find a place that feels like home.
Last updated: 01 Jun 2016