Buying a home in Australia, especially for first home buyers, is a difficult hill to climb, and it’s only getting higher and higher. With the higher prices of homes and the rising costs of living, how can you save for a home?
During 2022, the value of new homes has been dropping. This is an indicator of the pressures out there and that first home buyers cannot afford to borrow as much.
So what can you do? Real Simple Home Loans would like to give you a step-by-step process of buying a house.
Saving for a deposit
This is arguably the hardest part about saving for a home. Banks no longer allow 0% home loans, and now require at least 5% of the value of your loan as a deposit.
Look at how much you want to spend on buying a home, and work out what 5%, 10%, and 20% of that amount is. This is the amount of money you need to save for your deposit.
If you’re aiming at $600 000 for your first home, you’d need to try and save $30 000 for a 5% deposit, $60 000 for a 10% deposit, or $120 000 for a 20% deposit. A 20% deposit means you avoid Lender’s Mortgage Insurance.
Determining your budget
Knowing your budget will help you twice when buying your home.
- Firstly, it helps you create a savings plan to hit your deposit goal.
- Second, when you apply for a mortgage, they will want to see your budget spending to determine if you can service and pay off the loan.
When determining your budget, be as brutally honest as you can. There is no need to hide sneaky dinner dates, as the only people you’re lying to are yourselves, and the only thing you’ll miss out on is hitting your savings goals sooner.
Allow some play money in your budget. Doing nothing but scrimp and save will not make the process fun.
Calculating your mortgage
You can use one of our loan calculators to get an understanding of how much you will be required to pay when you purchase your home and have a mortgage.
Knowing this amount can help you scale up or down your repayments, help you choose how much you spend on a home, and help you shop around comparing home loan rates with various providers.
Finding a loan that suits you
There are two ways you can go about finding the right home loan for you. You can investigate yourself or use a mortgage broker.
- With the help of people such as Real Simple Home Loans, you can search and compare a range of home loans from a number of sources. You can compare home loan rates, the different fees and charges and other costs and benefits.
- With the help of a mortgage broker, they can find rates not advertised. They have relationships with various lending institutions and can explain to you the finer details of each kind of loan.
When and what to buy
What kind of home do you want to buy, or can you afford to buy? A unit or an apartment? A townhouse or a house with a backyard for the dogs? Are you interested in buying in suburbia, or can you feel the wind in the trees and your face?
When to buy is a trickier question. Trends show that spring is when more properties come onto the market, and more people come out to buy. However, if you’re looking all year round, and a place pops up in the dead of winter, go for it.
Searching for your new home
The time it takes to search for your new home can be long. Filling your Saturdays with inspections for months on end can be draining.
Be smart about this stage of looking for your home. Find clusters of open inspections in the suburbs you’d like to live in. This way, you can see more without driving all over town.
You can also contact agents for out-of-hours inspections if that suits your time better. Use online resources, such as realestate.com.au, to search by suburb, with filters for things like- the number of bedrooms, premise type, and swimming pool. You can also automatically add inspections to your online calendar.
Conducting a home inspection
When going through a home and inspecting, don’t just casually wander. You want to check for things. This is going to be your home. You don’t want it falling down around your ears just months after moving in.
Things to look out for:
- Water stains or mould, especially in the bathroom and the laundry.
- An uneven floor could need restumping.
- Check for large cracks in the walls.
- Check external roof lines. Make sure they’re straight.
- Check guttering for rust and that the drains run to either rainwater tanks or stormwater drains.
Feel free to ask the attending agent questions, such as when the house was built, when it was recently renovated, and how long the property has been on the market. Ask if there are any planned developments in the area. This could indicate the value of the property going up.
Making an offer
In Australia, there are two main ways to buy a house. The first is by making an offer. Do some due diligence, and have a conveyancer read through the Section 32 and the contract of sale for any strange additions.
If you’re all happy, then make a formal offer in writing by email. In this letter, address it to the Real Estate Agent, including the price you’re offering for the premise, the amount of deposit you’re offering, and the dates you wish to pay that deposit. Indicate any conditions, such as a pest inspection or structural inspection, subject to finance, and so on. Indicate the settlement dates as well.
Real estate agents are legally required to present all written offers to the vendor and get back to you with their decision.
There may be some negotiation, but if all goes well, your offer is accepted, a contract of sale is signed, and at the end of the settlement period, you deposit the remaining amount of money, less the deposit, and buy a house.
Going to Auction
The other main way to buy a house in Australia is through an Auction. You must register for the auction, you can’t simply turn up on the day to a house under auction and begin to bid.
The process of bidding at auction can be very strategic. The vendor will start the bidding at a price, and people compete, in real-time, upping the bids by dollar amounts, until a limit is reached. The person with the highest bid is left standing when the auctioneer’s gable falls, they win the auction.
It can be a bit more complicated than that. If the reserve price, or the minimum the vendor would consider selling at, is not reached, the house is passed in and not sold.
If you are the lucky winner, then you must be able to pay a 10% deposit on the day. You also sign the contract of sale. Some conditions can be added to the contract, such as a settlement period, pest inspections and so forth. Doing the legal work
Buying a house is a complex process, with contracts of sale and large sums of money. You do need to have a conveyancer or a solicitor who specialises in real estate. They ensure the title of the property is transferred to the buyer, and they advise of any other legal issues which may pop up along the way.
Moving in
The best bit about buying a house? Moving in! Rope your friends in to help you, and promise them pizza at the end of the day. Furnish your new rooms, buy some new furniture too, perhaps a new rug for the lounge room?
Be careful when moving in that you don’t put divots in your wall or break the door frame. Now that you own it, the repair costs will be on you.
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The team at Real Simple Home Loans want to see you in your new home, and we want to help you every step of the way. We have loans to help you, and advice to inspire you. Get in touch with our team, and let’s start the journey to becoming a homeowner, together.
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