What should I be careful of when buying a home?

Rates and fees last updated on

What should I be careful when buying a home

When buying a home, here are the pitfalls you should avoid.

For most of us, buying a home is the biggest financial decision we’ll make. When you’re talking about a purchase that will cost hundreds of thousands of dollars – or maybe even more in some Australian capital cities – you want to be sure that you make the right decision.

Buying a home is a complicated process, and there are plenty of obstacles you’ll need to overcome along the way. From following poor advice to choosing the wrong home loan lender, this guide runs through everything you should be careful of when buying a home.

Traps to avoid when buying a home

  • Accepting unqualified advice. The ‘help’ offered by friends and family can sometimes be a godsend, but advice from loved ones can quickly lead you into trouble if they don’t know what they’re talking about. Just because your best mate’s cousin is a real estate agent or a solicitor or was once a mortgage broker doesn’t necessarily mean that you should blindly follow their advice. Ensure that every professional you speak to is licensed with the relevant industry body. For instance, your mortgage broker should hold an Australian Securities and Investments Commission (ASIC) licence.
  • Failing to plan for the future. That cramped inner-city apartment might be perfect for your current lifestyle, but a home with more space would be a better option if you’re planning to start a family in the next couple of years. While it’s impossible to predict the future, take your future lifestyle plans into account when choosing a home.
  • Not doing any research. If you’re going to spend hundreds of thousands of dollars on a home, you want to be sure you’re getting a good deal – and the only way to be sure of that is to do plenty of research. What are the current market trends in the area? What have similar properties in the area sold for recently? What infrastructure projects are in the pipeline? Are there enough public services and amenities nearby? Is the property in a flood zone or at risk of bushfires? The more you know about an area, the better placed you are to work out whether a property is right for you.
  • Not negotiating. If you think a property is overpriced, don’t be afraid to negotiate down to a fair price. You have nothing to lose by asking for a better deal. However, if you’re going to negotiate, make sure you’ve done your homework. If you’ve noticed some cracks in the walls during an inspection or you think the property is overpriced compared to similar properties in the area, use this to up your bargaining power.
  • Selecting the wrong building inspector.  The building and pest inspection is a crucial stage in the property purchase process, so don’t simply breeze through it by choosing the cheapest inspector you can find. Make sure you work with an experienced professional who will cast a thorough eye over every aspect of your property and give an honest appraisal of any problems.

Building inspection checklist

Building inspection iconA trusted and experienced building inspector will check a wide range of factors when inspecting a property:

  • The interior of the property, including the kitchen, bathroom, bedrooms, laundry and toilet
  • The exterior of the property, including the roof
  • Any underfloor space
  • Any roof space
  • The property site, including the garage, carport, paths, driveway, fences and retaining walls
  • Some building inspectors also conduct pest inspections at the same time

Once the inspection has been completed, you’ll receive a written report detailing the condition of the property.

  • Ignoring faults and defects. It’s vital that you take the time to sniff out any potential problems with the property that could create stress (and expenses) in the future. From mould and odours to pests and even structural defects, make sure you’re fully aware of all the baggage your home comes with and how much you’ll need to pay to fix any issues.
  • Over-committing. Before you put an offer in for any home, make sure your budget will be able to cover the cost. Not only will you need to factor in your deposit and interest repayments on your home loan, you also need to budget for costs such as loan fees, lenders mortgage insurance (LMI), stamp duty, and conveyancing and legal fees. Then there are your other ongoing expenses to consider as well, so you need to be certain you aren’t biting off more than you can chew. Use our property buying calculator to get an idea of the costs involved.
  • Assuming that buying is your only option. Depending on where you live, the cost of renting may work out to be cheaper than buying over your lifetime. You may not have to buy a home and there are plenty of potential benefits to renting, so keep this option in mind.
  • Letting your heart rule your head. Buying a home is an emotional decision; it can be very difficult to think clearly and rationally. Always remember the importance of making decisions with your head rather than being ruled by your emotions. If you can’t eliminate emotion from your decision-making, surround yourself with professionals so you can get independent advice.

Kath and Ryan’s mistake

What should I be careful of when buying a home case studyKath had always promised herself that she would take her time when it came to buying a house, but she soon found out that was easier said than done. On her second weekend of attending open-house inspections, Kath finds a great two-bedroom home in Melbourne’s eastern suburbs.

Clocking her interest, the real estate agent is quick to inform Kath that there are several other interested buyers. Not only that, the current owners are keen to sell as quickly as possible.

Caught up in the excitement of having found a potential property, Kath overlooks a couple of concerns she has about the property: It’s a little further from public transport than she would like, and it wasn’t a three-bedroom home that Kath and her partner, Ryan, were hoping for in anticipation of starting a family soon.

Before they rush into a decision, Kath and Ryan decide to consult a mortgage broker, a buyer’s agent and an accountant for independent advice. After speaking with the professionals, Kath soon realises that the property does not match her lifestyle or budget needs, and they decide to research neighbouring suburbs.

Traps to avoid when choosing a home loan

  • Not getting pre-approval. Getting home loan pre-approval from a lender can increase your property buying power, but some so-called ‘pre-approvals’ from lenders are worthless. Make sure your lender offers fully assessed pre-approvals so that you will be able to access the funds you need if you decide to buy a property.
  • Borrowing too much. Before you take out a home loan, consider how much you can comfortably afford to repay each month. Take your income, debt and other ongoing expenses into account – not to mention potential interest rate rises – when calculating your repayment capabilities. Use our borrowing power calculator to estimate how much you can afford to borrow.
  • Not shopping around. The loan you choose will impact your finances for several years, maybe even a few decades, so don’t just choose the first home loan you find. Compare different home loan features and fees to find one that meets all your borrowing requirements.

Compare a selection of home loan rates today

$
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
loans.com.au Essentials - Variable (Owner Occupier, P&I)
A basic home loan with a competitive rate and low fees.
3.64% 3.66% $0 $0 p.a. 80% Go to site More info
HSBC Home Value Loan - Resident Owner Occupier only
Enjoy a low variable rate with no ongoing fees and borrow up to 90% of the value of the property.
3.85% 3.86% $0 $0 p.a. 90% Go to site More info
Tic:Toc Live in Loan Variable Rate
A competitive variable rate product with low fees offered by a 100% online lender.
3.68% 3.69% $0 $0 p.a. 80% Go to site More info
Reduce Home Loans Rate Buster 100% Offset Variable Home Loan - Up to $750k (LVR <=80%)
Borrow up to 80% LVR with no ongoing fees and a 100% offset account.
3.54% 3.54% $440 $0 p.a. 80% Enquire now More info
loans.com.au Offset Variable - Up to 80% LVR (Owner Occupier P&I)
Take advantage of a 100% offset account along with no annual or application fees.
3.72% 3.74% $0 $0 p.a. 80% Go to site More info
IMB Budget Home Loan - Special LVR <=80% (Owner Occupier and Principal & Interest only)
A special limited time offer for owner occupiers. An IMB Transaction Account must be opened with this loan.
3.79% 3.84% $445 $0 p.a. 80% Go to site More info
Bank Australia Basic Home Loan - Variable (Owner Occupier)
Pay no ongoing fees on a competitive variable rate home loan.
3.86% 3.87% $0 $0 p.a. 80% Go to site More info
UBank UHomeLoan Variable Rate - Standard Variable Rate Value Offer (Owner Occupier P&I)
Combine a low variable interest rate and free redraw with no application or ongoing fees.
3.74% 3.74% $0 $0 p.a. 80% Go to site More info
NAB Choice Package Home Loan - 2 Year Fixed (Owner Occupier P&I) First Home Buyer Special
A special rate for first home buyers buying residential property and borrowing over $150K. 350K NAB Rewards Points offer available. Terms and conditions apply.
3.69% 4.86% $0 $395 p.a. 90% 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%.
3.80% 3.81% $0 $0 p.a. 95% Enquire now More info
IMB Budget Home Loan - LVR <=90% (Owner Occupier)
Get a competitive rate without features you may not use.
3.97% 4.02% $445 $0 p.a. 90% Go to site More info
Newcastle Permanent Building Society Fixed Rate Home Loan - 2 Year Fixed (Owner Occupier Special Rate, P&I)
Owner-occupiers can lock in a competitive rate with no ongoing fees. Conditions apply.
3.74% 4.85% $0 $0 p.a. 95% Go to site More info
Mortgage House Advantage Variable Home Loan - 80 (PAYG Special No Offset)
A home loan with a competitive variable rate, limited fees and plenty of flexibility.
3.64% 3.66% $0 $0 p.a. 80% Go to site More info
Bank Australia Basic Home Loan - Special LVR <70% (Owner Occupier)
A special variable rate home loan with no application or ongoing fees.
3.74% 3.75% $0 $0 p.a. 70% Go to site More info
3.79% 4.07% $500 $0 p.a. 95% Go to site More info
  • Over-applying. Making multiple applications within a short period of time can harm your credit file. If a lender reviews your credit file and sees several previous enquiries, it may be assumed that you’ve been rejected for other home loans. The lender will see this as a red flag, which could reduce your chance of being approved.
  • Getting sucked in by an introductory rate. Home loans that offer a discounted interest rate for an introductory period may sound like an attractive prospect, but make sure you’re aware of the rate you’ll receive once that introductory period ends. For instance, you may receive a competitive rate of 4.5% for the first 12 months, and then it may revert back to the standard variable rate of 5.5%, which will affect your repayments.
  • Not using features. It’s vital that you choose a loan with features that match your borrowing needs such as the ability to make unlimited additional repayments or the inclusion of an offset account to reduce the amount of interest you pay.
  • Not getting advice. Choosing the right home loan can be very difficult, so don’t hesitate to ask a licensed mortgage broker for assistance. Brokers assess your borrowing needs and then present you with a selection of suitable loans from their panel of lenders. They can even guide you through the application process from start to finish, helping you avoid any traps and pitfalls along the way.

Images: Shutterstock

Was this content helpful to you? No  Yes

Related Posts

Bank Australia Basic Home Loan - Variable (Owner Occupier)

Pay no ongoing fees on a competitive variable rate home loan.

NAB Choice Package Home Loan - 2 Year Fixed (Owner Occupier P&I)

A fixed rate package with flexible repayment options. 350K NAB Rewards Points offer available. Terms and conditions apply.

IMB Budget Home Loan - LVR <=90% (Owner Occupier)

Get a competitive rate without features you may not use.

HSBC Home Value Loan - Resident Owner Occupier only

Enjoy a low variable rate with no ongoing fees and borrow up to 90% of the value of the property.

Ask an Expert

You are about to post a question on finder.com.au:

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • finder.com.au is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Finder only provides general advice and factual information, so consider your own circumstances, read the PDS or seek advice before you decide to act on our content. By submitting a question, you're accepting our Terms and Conditions and Privacy Policy.
Ask a question
feedback