First Home Buyers Are Special
Buying your first home is a big move
Buying your first home is usually the biggest single financial commitment that you have had to make so it is understandable if it is a little daunting and perhaps even overwhelming.
At FinancialPlus, we understand this but we go out of our way to make it as easy as possible because we believe that first home buyers are special.
There is so much to learn not only about getting the finance but also the steps involved in actually buying a property but we can help you through this as part of the mortgage planning process that we adopt with first home buyers.
This planning process involves understanding just where you are in the buying process – have you just started and are more interested in getting an idea of how much you can borrow and how much you need to save as a deposit or are you further down the track and ready to buy.
Either way, we will work through the whole process with you from your starting point – working out how much you can borrow, providing estimates of costs, identifying lenders and loans that suit you, collecting all requirements, liaising with the chosen lender, completing and lodging the First Home Owners Grant, liaising with your solicitor to ensure that settlement goes off smoothly and, just as importantly, working with you to make sure that every thing is working well after you move in.
There is so much involved in buying your first home – getting a loan in some ways is the easy part (some of the time) but is it the right loan and can you afford to make a mistake on such a big issue.
This varies from state to state. Some states continue to offer assistance for First Home Buyers in one of two ways – the First Home Owners Grant (commonly referred to as the FHOG) and Stamp Duty Concessions – but in Queensland, the FHOG was replaced in October 2012 by Great Start Grant (originally called The First Home Owner Construction Grant) of $15,000 for first home buyers who are buying a newly constructed or off-the-plan property.
In Queensland, The Great Start Grant is a one-off grant available to First Home Buyers intending to live in the home within twelve months of buying the property. Basically, you should normally be eligible for the Great Start Grant if you are an Australian citizen or a permanent resident who is buying or building your first home in Australia. It is important to note that if you are purchasing the property in conjunction with others, they must also meet the same criteria for the grant to be available.
The stamp duty concessions mean that the State Government does not levy any stamp duty on purchases by First Home Buyers where the purchase price is less than $500,000. This provides substantial savings over a purchase by someone that is not a First Home Buyers.
Be warned though, that you have to live in the property for 6 months to remain eligible for the Great Start Grant and to live in the property for 12 months to remain eligible for the Stamp Duty Concessions but we can help you more with these conditions.
Factors that affect how much you can borrow
The amount that you can borrow is often called your borrowing capacity.
It is not easy to work this out using the many calculators that you find on the internet because there are so many policies that you need to satisfy and it is extremely hard to work this out.
Even at this point, it is not easy if there are components such as overtime, bonuses, commission payments, family allowance, maintenance, car allowances, credit cards, company cars, store cards, personal loans – to name a few. There is an enormous difference in how lenders treat different components.
Sometimes reducing your credit card limits or using some of your savings to payout a car loan can substantially increase your borrowing capacity.
It is possible for us to work out your borrowing capacity as we have special software available that provides access to not only the calculators that each of our lenders uses but also to information on their credit policies so that we can determine your eligibility.
How much you will need in savings
The greater the deposit that you can provide, the more options that you have available. As well as this, the interest rates are sometimes better with higher savings but the absolute minimum deposit that you will need to have available is 5% of the purchase price of the property plus the costs of buying the property. The deposit can be from your own savings, the FHOG or even a gift from the family.
The costs include your legal fees, pest and building inspection, lender fees and government fees and charges and whilst they do vary from vary from state to state, in Queensland they would generally be restricted to around $2,500 for first home buyers on a $300,000 purchase.
Mortgage Insurance is unfortunately a cost that is passed onto the borrower although all it does is protect the lender if you default on your repayments and they need to repossess the property. Mortgage Insurance can add a few thousand dollars to the costs but it is based on two factors – the amount that you borrow and how this compares to the value of the property. Often the Mortgage Insurance can be added to the loan so you may not have to have savings to cover this from your own pocket.
We can help you understand all costs involved.
Often your Mum or Dad or another family member is happy to help you by utilising their property as security for your loan.
This can save thousands of dollars in Mortgage Insurance as you only end up borrowing 80% of the value of the property that you are buying and then borrowing a further 20% against the other property that is being used as security.
Not all lenders will do this type of loan and most lenders have different policies about this but it is just one of the many options that we can cover with you as part of our mortgage planning process for First Home Buyers.
With a Family Guarantee, you are still responsible for repaying both loans but if something goes wrong and you default on the loan, then you could jeopardise your family’s property.
Once you have paid the debt down or the value of the property has increased, the mortgage over your family’s property can be removed.
Family are often more comfortable doing this rather than giving you cash for a deposit and if you have family that may be able to help, then we can help them understand the process and what is involved.