Tips for first home buyers in Australia

Top Tips for First Home Buyers in Australia

Rates and Fees verified correct on December 11th, 2016

How to buy your first home the right way

Buying your first property can be an overwhelming process. First time borrowers can face uncertainty over how to apply for a home loan, how to get approved, the grants they might be eligible for and where they should look to buy. On top of that, the home buying process can be filled with steps you never knew existed and jargon you've never hear before.

This guide will ensure you're more confident when buying your first property, and ready to take on that real estate agent.

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Eight tips for first home buyers

Boost your confidence and your home loan know-how with the following eight tips:

  • 1. Consider a mortgage broker. A mortgage broker is there to help you find the right home loan for your situation. Since this is your first home loan, a mortage broker can show you the ropes and explain all the features available.
  • 2. Plan your budget. There is nothing more important when contemplating buying your first home than planning a workable budget and sticking to it, as well as continuing with a revised edition once you have successfully pocketed the keys. It will be through sticking to a budget that you'll get a clear picture of the home loan you can afford.
  • 3. Know your limitations. Whatever you do, do not buy what you can't afford. It's easy to convince yourself that you'll only have to struggle for a couple of years and that everything will be alright once that big promotion comes along. What if something were to happen in the meantime, or the promotion never came? You could stand to lose everything, and you will not have the benefit of the First Home Owner Grant or any other first home buyer incentives the second time around.
  • 4. Save the biggest deposit that you can put together. Saving a deposit will help you in two ways. First, it will show your potential lender that you can exercise financial discipline over a period of time. Secondly, the bigger the deposit the larger the equity you have in your property right from the start. This means you will pay less interest. One of the best ways to save your deposit may be to take out a high interest savings account.
  • 5. Apply for the First Home Owner Grant early. The most appropriate time to apply for the First Home Owner Grant is at the same time you apply for your home loan. You can lodge your grant application through most lenders, if they are an authorised agent and able to receive it. If you do this it will be processed faster than if you send it directly to your relevant State or Territory Revenue Office, the government authority that administers it. In most cases the grant will be processed by the time of settlement or, if you are building, by the time your lender will be paying over the first scheduled construction loan payment. If you miss out, you will still have 12 months from settlement, or from the completion of the building, to apply. Even then, in special circumstances, the commissioner can further extend this time limit.
  • 6. Rid yourself of excess debt. Do not make the mistake of applying for your first home loan while you are carrying excessive debt. Do away with any credit cards you don't really need, finish off your car payments and pay down any personal loans. Make your home loan your top priority.
  • 7. Be a cynical buyer. Do not necessarily believe all you are told. Make sure you carry out thorough building and pest inspections and find out what prices similar houses are selling for in the same locality. If you do your research properly you should be pretty right.
  • 8. Make certain you receive all that you are eligible to receive. The various state and territory governments also offer their own incentives to first home buyers in the way of grants. Most states also give generous concessions off the costs of stamp duty imposts. Make sure you know what is available in the locality you are buying your first home.
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Things for first home buyers to consider

As a first home buyer in Australia, there are a range of considerations. These include:

Buying an established home

If you want the ease of moving into a home which is already landscaped and liveable then you may consider buying an established home. Buying a home which has already been built has the advantage of being in an established area with established streets, footpaths, nearby parks and, importantly, shops and transport.

Need to know how much a house will cost?

Buying an established home and then renovating

You may like the location of a property but not want to, or not be able to build a new home. In this case you might be interested in buying an older established property and then carrying out some improvements, whether cosmetic or structural, or a combination of both. This way you can get the benefits of a new home with the location and amenities of an established home.

Home renovation guide

Building your own home

If you would prefer to put your own stamp on your home from the beginning then you might want to build your first home from the ground up. Choosing the block and the neighbourhood, the street and the orientation, choosing the plan and the builder, then choosing everything from the doorknobs to the paint colours, the pavers to the curtains and everything in between. If you are building your own home, you will need to apply for a construction loan to draw down on funds.

Construction loans guide

Undecided about whether to build or buy?

The benefits of buying an established home may appeal to you until you go down that path and see just how many homes really do need a new kitchen or a bigger bedroom. However, as you start to look into building your own home, the horror stories of 'lazy builders' ring in your ears and you may think it is easier to buy a house you can move into right away instead of nine months down the track. It is easy to see-saw back and forth between the pros and cons of both buying and building, and you are not alone in your confusion. At the end of the day you need to be happy with your choice now and into the future, so take all the time you need to decide.

Do you know how much it will cost you?

On the road to a strong deposit

Whether you have been planning to allocate your savings to a first home deposit for years, or have simply been making regular contributions and have now decided your savings balance would make a healthy home loan deposit, if you have an established savings routine and a strong savings balance you are well on your way to being in one of the best positions a first home buyer can be in Australia. You now have the luxury of choice, because you can choose from a range of loans and you can take your time in finding the right loan and the right home.

Need help working how much deposit you'll need?

How big a deposit will you need?

Very few Australians really fathom the size of the deposit required to get them into the first home of their dreams. You may have underestimated the amount of deposit you need because rising interest rates and rising house prices have gotten away from you. However, just because you don't have tens of thousands of dollars in the bank doesn't mean you can't buy your first home. You may just need to shop around for a loan which requires a smaller deposit. and readjust your ideas about what your first home will look like. Be willing to start much smaller, or put in the work to renovate.

As you can see, first home buyers in Australia come in an endless range of shapes and sizes. You might think that your first home buyer needs are unique, unaffordable or unmanageable, but that's probably not the case at all. All you need to do is view the home loan comparison tables here and you will start to get an idea of the range of unique home loans available to first home buyers. You can then follow a secure link to enquire about your chosen loan or to apply today if you've already made the decision.

Comparison of Home Loans

Rates last updated December 11th, 2016.

CUA Kick Start Variable Home Loan - 2 Years Introductory (Owner Occupier)

Comparative rate decreases by 0.03%

November 29th, 2016

UBank UHomeLoan Variable Rate - Standard Variable Rate Value Offer (Owner Occupier P&I)

Comparative rate increases by 0.10% | Interest rate increases by 0.10%

December 2nd, 2016

Newcastle Permanent Building Society Fixed Rate Home Loan - 3 Years Fixed (Owner Occupier)

Interest rate is now 3.99%

December 5th, 2016

View latest updates

Jodie Humphries Jodie
$
Loan purpose
Offset account
Loan type
Your filter criteria do not match any product
Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment
HSBC Home Value Loan - Resident Owner Occupier only
Enjoy the low variable rate with $0 ongoing fee and borrow up to 90% LVR.
3.55% 3.57% $0 $0 p.a. 90% Go to site More info
3.74% 3.74% $0 $0 p.a. 80% Go to site More info
loans.com.au Essentials - New Purchases Only Up to 80% LVR (Owner Occupier, P&I)
Special offer ends 15 December. A low variable rate for new purchases as well as no application or ongoing fees.
3.39% 3.41% $0 $0 p.a. 80% Go to site More info
State Custodians Standard Variable Spring Special - LVR 80% (Owner Occupier)
Special Owner Occupier Rate. Free Offset Account.
3.59% 3.92% $0 $299 p.a. 80% Go to site More info
3.94% 4.33% $0 $395 p.a. 90% Go to site More info
ClickLoans The Online Home Loan - Owner Occupier ≤ 80% LVR
Enjoy a competitive interest rate when you have a deposit of at least 20%.
3.69% 3.69% $0 $0 p.a. 80% Go to site More info
ANZ Breakfree Package Home Loan - 2 Year Fixed (Owner Occupier) $150k+
This 2 year fixed ANZ Breakfree Package rate comes with package discount and product bundle. Terms and conditions, package fee and fees, charges & eligibility criteria apply.
3.75% 4.62% $0 $395 p.a. 95% Go to site More info
Newcastle Permanent Building Society Premium Plus Package Home Loan - New Customer Offer ($150,000+ Owner Occupier)
Apply for a new owner occupier loan or refinance from another lender and receive this discounted rate.
3.74% 4.12% $0 $395 p.a. 95% Go to site More info
CUA Kick Start Variable Home Loan - 2 Years Introductory (Owner Occupier)
Borrow up to 90% LVR and enjoy an introductory rate for the first 2 years.
3.69% 3.87% $600 $0 p.a. 90% Go to site More info
Greater Bank Ultimate Home Loan - Discounted 1 Year Fixed ($150K+ Owner Occupier)
Discount off an already competitive interest rate for loans over $150k. NSW, QLD and ACT residents only.
3.59% 4.42% $0 $375 p.a. 85% Go to site More info
loans.com.au Offset Variable - New Purchases Only Up to 80% LVR (Owner Occupier, P&I)
Special offer ends 15 December. No application or annual fees, and access to a 100% offset account.
3.49% 3.51% $0 $0 p.a. 80% Go to site More info
ME Bank Flexible Home Loan Fixed - 3 Year Fixed Rate (Owner Occupier)
A competitive 3 year fixed rate with a redraw facility and split loan options, plus no application fee.
3.84% 4.66% $0 $0 p.a. 95% Go to site More info
State Custodians Standard Variable Spring Special - LVR 90% (Owner Occupier)
Special Owner Occupier Rate. Free Offset Account.
3.69% 4.02% $0 $299 p.a. 90% Go to site More info
Newcastle Permanent Building Society Fixed Rate Home Loan - 2 Years Fixed (Owner Occupier)
Enjoy a low interest rate and borrow up to 95% (with LMI) of your home value.
3.99% 4.81% $0 $0 p.a. 95% Go to site More info
NAB Base Variable Rate Home Loan - Owner Occupier (P&I)
A competitive no frills home loan with no application fees for a limited time. 250,000 Velocity Frequent Flyer point offer, conditions apply.
4.10% 4.14% $0 $0 p.a. 95% Go to site More info
AMP Essential Home Loan  -  Owner Occupier
Take advantage of a redraw facility, competitive variable rate and no application or settlement fees for a limited time.
3.98% 4.00% $350 $0 p.a. 90% Go to site More info
Newcastle Permanent Building Society Fixed Rate Home Loan - 1 Year Fixed (Owner Occupier)
Get a short term fixed rate for that investment property with no application or ongoing fees.
3.99% 4.90% $0 $0 p.a. 95% Go to site More info
IMB Budget Home Loan - LVR <=90% (Owner Occupier)
A competitive budget rate without any unwanted bells and whistles.
3.87% 3.92% $445 $0 p.a. 90% Go to site More info
Bank Australia Basic Home Loan - Variable (Owner Occupier)
A competitive variable that allows borrowers to borrow from a minimum of $100,000 and $0 ongoing fee.
3.59% 3.60% $0 $0 p.a. 80% Go to site More info
Australian Unity Health, Wealth and Happiness Package - (Owner Occupier)
Get a 0.60% discount on your rate, a 100% offset account and no ongoing fees.
3.99% 4.02% $600 $0 p.a. 90% Go to site More info
Newcastle Permanent Building Society Fixed Rate Home Loan - 3 Years Fixed (Owner Occupier)
Split your loan for free with one of the lowest fixed home loan rates.
3.99% 4.73% $0 $0 p.a. 95% Go to site More info
IMB Essential Home Loan - LVR < 80% (Owner Occupier)
Get a discount on your rate and flexible repayment options with this loan.
4.09% 4.09% $0 $0 p.a. 80% Go to site More info
NAB Choice Package Variable Rate - $250k to $749,999 P&I (Owner Occupier)
A great variable package from NAB which includes offset and redraw features. No application fee.
4.40% 4.79% $0 $395 p.a. 95% Go to site More info
NAB Choice Package Home Loan - 2 Year Fixed (Owner Occupier)
A fixed rate package loan with flexible repayments options. 250,000 Velocity Frequent Flyer point offer, conditions apply.
3.75% 4.87% $0 $395 p.a. 95% Go to site More info
St.George Basic Home Loan - Promotional Rate (Owner Occupier, P&I)
A no frills loan with a competitive rate and a maximum LVR of 95%.
4.08% 4.09% $0 $0 p.a. 95% More info
Westpac Flexi First Option Home Loan - 3 Years Introductory Special Offer (New Owner Occupier, P&I)
A limited time deal for new owner occupiers. Advertised rate includes 1.03%p.a. discount for the first two years.
3.99% 4.37% $0 $0 p.a. 95% More info
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Auction advice from The Block 2016 winning auctioneer Damien Cooley

Transcript

Damien: I think the best advice that I can give a first time buyer, I mean, obviously, they need to do their homework and whether that fits for them, the property is right for them. And I say to them, "Well, are you investing or are you buying where you wanna live?"

If you're buying where you wanna live, just go and buy in the area that you wanna live in. If you're investing, you need to be a little bit more strategic about where you buy to try and get the best yield rental return that you can for that property.

Affordability also comes into play. If you've got half a million dollars to spend, well, you know that you can't go and buy a three-bedroom house in Rose Bay. So, you're gonna be saying this off, "Well, where can I afford to buy? Let's look at where I can afford to buy then. Let's find what sort of property. Is it a one-bedroom unit, a two-bedroom unit, or a three-bedroom unit can I afford to buy?"

When that first time buyer then goes to auction, the best advice that I can give them is to take some along to the action with you, take someone who's got the experience. You can employ a buyer's advocate or a buyer's agent in any area throughout Sydney, Melbourne, or any state or territory in Australia and you can actually just employ them.

If you prefer to, if you can afford the full service to get them to find a property for you and search, you can employ them and even a real estate agent to go and bid at auction for you. Having a professional bidder represent you at an action can save you tens, if not hundreds of thousands of dollars.

My role is to get as much as I possibly can out of the buyer and I make no apology for that. That's what I'm being remunerated to do and that's why I think it's always good to get somebody to represent you, to bid for you at auction because their role is to buy it cheaply as they possibly can. They remove emotion. They bid at thousands of auctions and they understand how auctions work and I understand what I'm thinking and how I'm trying to get the most out of them.

So if I was a first time buyer, I'd really be investing in getting someone to represent me at auction. And if I couldn't afford somebody like that, I'd have my mom, my dad, or somebody who's been to auction before, that been around the traps and know what they're doing.

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Considerations when searching for your first home

There are a number of factors to consider when deciding where to search for a home, and not all of them have to do with the price:

  • Transport: The quality of public transport can be a major factor in making your decision to buy in a certain area. The cost of running your car long distances each day could well infringe on your ability to keep up with home loan repayments, particularly during times of interest rate increases.
  • Shops: Living in close proximity to a shopping centre can make a major difference in the convenience of your day-to-day activities.
  • Schools: As your children grow and move from kindergarten into primary school and then from high school into university you will need to be reasonably close to such facilities.
  • Work: We all have to go to work, and if you can't live nearby your workplace you should ascertain that the available transport system will get you there.
  • Future expansion: As your family grows your first house may well prove to be too small for the changing circumstances, so look into the future and satisfy yourself that you can expand if need be.
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Buying your home is a big step and it is important to make sure that you arm yourself with as much knowledge as you can.

Image: Shutterstock

Marc Terrano

A passionate publisher who loves to tell a story. Learning and teaching personal finance is his main lot at finder.com.au. Talk to him to find out more about home loans.

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Related Posts

HSBC Home Value Loan - Resident Owner Occupier only

Enjoy the low variable rate with $0 ongoing fee and borrow up to 90% LVR.

ME Bank Basic Home Loan - LVR <=80% Owner Occupier

A low variable rate loan with no application or ongoing fees.

NAB Choice Package Home Loan - 3 Year Fixed (Owner Occupier)

Receive discounts on interest rates with the Choice Package. 250,000 Velocity Frequent Flyer point offer, conditions apply.

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6 Responses to Top Tips for First Home Buyers in Australia

  1. Default Gravatar
    Peach | May 29, 2014

    the First Home Savings Account here is ancient, not updated since 2010. All the dollar limits have since been changed AND the whole scheme has subsequently been scrapped.

    • Staff
      Shirley | May 29, 2014

      Hi Peach,

      Thank you for your feedback, we’ve now updated the page so it’s relevant for our users.

      Cheers,
      Shirley

  2. Default Gravatar
    Jim | May 19, 2014

    Dear sir/madam

    I am buying an established property from a seller
    for $216,000 in fifteen months time to be paid in
    cash from my own savings. The seller is still paying for the mortgage. Could you please tell me
    how and to whom and in what manner should this money be paid?
    Should the payment be made before or after the documentation has been completed?

    Could you please give me an estimate of all other cost including the GST.

    • Staff
      Elizabeth | May 20, 2014

      Hi Jim,

      Thanks for your question.

      Usually, payment is made when the seller and the buyer exchange signed copies of the contract of sale. If you are using a solicitor to draw up the documents then they may be able to advise you how the money should be paid, as the payment terms may be specified in the contract.

      As for GST, the ATO has a GST Property Tool that can calculate the GST that will be payable in the sale.

      I hope this has helped.

      Thanks,

      Elizabeth

  3. Default Gravatar
    phillip | February 2, 2014

    is the first home owner grant only for new homes

    • Staff
      Shirley | February 3, 2014

      Hi Philip,

      Thanks for your comment.

      Yes the FHOG is only for new homes.

      Cheers,
      Shirley

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