FIRST HOME BUYER
Buying your first home can be an overwhelming experience, but with the right advice and help from Loan Initiatives, the whole process can be smooth sailing and very exciting.
Things to consider before deciding to buy
• Current Financial Situation
• How much can I borrow?
• How much will it cost?
• Lender’s Mortgage Insurance (LMI)
The size of your deposit will depend on the value of the home you wish to purchase. Most lenders will want to see at least a 5% – 10% deposit of the purchase price. For example
House Price including costs – $350,000
Deposit at 5% – $ 17,000
Deposit at 10% – $ 35,000
The more money you can contribute towards your new home as a deposit, the more choices you will have when selecting your lender and home loan.
Most lenders will also want to see that you have been able to consistently save money over a 3-6 month period.
How much can I borrow?
To look at what you can borrow and what you can afford, one of our brokers will take you through you current financial situation.
The level of debt that you have directly affects what you can borrow. You may want to consider reducing your current debt level prior to purchasing your first home if you are worried about not being able to borrow enough.
Another option to look at is applying for a pre-approval, so that you know what your purchase limit is and only look at properties that fit within those figures. As a pre-approval is generally valid for up to 3 months, this can give you time to go to auctions and shop around to find your dream home.
How much will it cost?
Stamp duty – This is a government cost that all new home and land purchases incur. For a guide on how much stamp duty you will pay go to http://www.revenuesa.sa.gov.au/taxes-and-duties/stamp-duties/calculators/stamp-duty-on-conveyances-calculator-new.
Conveyancing Costs – Conveyancing is the process of transferring property ownership from vendor to buyer. A conveyancer will review the contract of sale and ensure appropriate checks are conducted. These fees will vary depending on the Conveyancer that you use.
Loan Set Up Costs – Loan set up costs will vary depending on the lender and product that you select. This can include establishment fees, annual/package fees and other costs relating to the loan. These fees can be paid upfront or included in the loan.
Lender’s Mortgage Insurance (LMI)
Lender’s Mortgage Insurance is an insurance that protects the bank against defaults. When you borrow more than 80% of the value of a property, you have to pay LMI regardless of what lender you are with. The amount of LMI you pay increases with the loan amount that you have. To avoid paying Lender’s Mortgage Insurance ensure that you save a deposit of 20% or more.