Tips for buying your first home in Australia

Buying a home isn’t a simple process.  If you’re looking to purchase or build your first home, careful planning can help you make a good purchase decision.

Whether energy saving features such as passive design are important to you, or you’re focused only on price and location, start with these essential tips when buying your first home in Australia. 

Sort your finances

Before you find your dream home, if you’re planning on applying for a loan to assist with a purchase, check you’re eligible to borrow.

Loan pre-approvals hold no guarantees and are only indicators to lenders of your income, personal debts and expenditure. Don’t fall in love with places before you know what you can afford!

First homebuyers should look at ways to minimise any debt and save towards a deposit. Ideally, you’ll want to save a deposit of 20% of the purchase price of your target home. Buyers with less than 20% deposit may be required to pay Lenders Mortgage Insurance (LMI) to protect the credit provider. This often means a high-interest rate associated with repayments.

Although not essential, a 20% deposit can set you up for manageable repayments.

If saving for a deposit seems daunting there are grants and concessions available for those who meet certain criteria. If you’re eligible, first homeowners' grants and stamp duty concessions can save you thousands.

Tip: Don’t forget to create a realistic budget – and stick to it! Take advantage of online household budget planners to keep you on track. Remember, just because a bank lends you a large sum of money, doesn’t mean the repayment is achievable. Know what you can afford and find your ideal home that fits.

Don’t underestimate purchase costs

Unfortunately, a 50% deposit and $500,000 home loan doesn’t mean securing a $550,000 property. There are multiple costs involved that should be factored into your budget.

Some of these include:

• Stamp duty – a mandatory tax that’s applied to buying a property in Australia. This is likely to be your second biggest cost, aside from the property purchase itself.
• Government fees – mortgage registration and transfer (state) fees. The government requires your purchase to be formally registered and charges a fee to do so.
• Insurance – a smart investment to protect your purchase. Mortgage protection insurance and building insurance are important and should be taken out the day you sign the contract. Borrowing more to purchase your home may result in an LMI to pay on top.
• Service fees - A solicitor or conveyancer may be required for the transfer process (if tasks such as title searches are needed).
• Council and utility rates – homeowners need to pay council and water rates.
• Loan application fee – Banks charge a loan fee which varies between loan products and lenders. Some lenders will waive this fee, so it’s always worth asking.
• Building inspection reports – You may want a professional building inspection prior to purchase to ensure your potential new home has no major structural or safety issues.

Look for passive design features

If you want to save money long term, opt for passive design to create an energy efficient home.

If building new, investing in passive design early lowers your power bills and carbon footprint and increases the property’s value at resale time. Its primary goal is to lower a building’s energy consumption, which reduces the need for cooling/heating and increases indoor comfort. Better insulation and maximizing natural ventilation are core features of passive design.

Implementing passive design when you're building offers homeowners greater control. However, buying or modernising a home is also an effective time to choose green elements.

Consider:

• Energy efficient windows, as they’re a large source of natural light.
• Building orientation to benefit from shading and cooling breezes.
• Lighting, use LED lights over halogen and install skylights.
• Use recycled materials and grow your own produce.
• Solar power.
• Cross-ventilation for wind-powered cooling.
• Good insulation in ceilings and walls, which will also assist with blocking noise.
• Roof vents to help release heat from the ceiling cavity.
• Sustainable landscaping with drought-tolerant plants and water saving solutions (rainwater tanks or recycle greywater).

Focus on what’s important to you

It’s critical to stay focused on the important details throughout your house hunt.

A real estate agent’s savvy sales skills and the excitement of buying your first home can make property features appear shinier. But don’t be distracted by features you don’t need or want.

First homes are more than investments. It’s where you eat, sleep, host friends and raise children - find one that you can afford which meets your needs. Nice-to-have features can drive up costs and leave you with little value once the excitement wears off.

Consider all aspects of the property

Price and location are often deciding factors when buying a first home. But, they’re not everything.

Consider all aspects of the property such as local amenities (now and planned), suburb trends, what the local council is like and future infrastructure or building plans in the area. The community you live in can have just as much of an impact on your life as the house itself.

Tip: Price is what you pay, value is what you get. Make sure you buy the right property, not the cheapest property or a home only based on price.

Don’t skimp on the inspection report

If you’re buying a home, never make a purchase before having the property inspected by a professional.

Although it’s an extra cost (and not mandatory), it’ll show any defects which may be hiding, like shifting foundations, faulty wiring and damp plumbing. Inspections can cost between $100 and $1,000 but will ensure you can budget for repairs and know exactly what you’re purchasing.

Building, pest, electrical and strata inspections should be finalised before the cooling off period. This is the timeframe (usually two to five business days) where buyers can back out of the purchase.

Once your finances and features are sorted, be clever in your purchase decisions. Don’t let the agents know immediately you’re in love with a home. If you can’t afford it, move on and keep looking – your dream home shouldn’t cripple you financially.