10 essential tips if you are a first time home buyer
Buying your first home is not easy. It's likely to be the biggest purchase you will ever make and very few people feel really ready to dive into buying their first home. In the early stages you will have a lot of questions about where to go, what certain words mean and what's relevant to you. Whereas we can't give you all the answers in one simple blog post we can begin to outline a few key things you'll need to think about when buying your first home.
1 - Start a savings plan - and don't touch it!
It's never too early to start saving. You might be looking at a 20% deposit and think "I'll never save that" but the actual amount you save is only a small piece of the overall picture. Yes you will need some hard cash to go towards a deposit but banks also look at your ability to set money aside each month and not touch it. They want to see that you can manage your money properly.
If you're currently renting you might think that's impossible but even small amounts will show that you can make sacrifices and prioritise your finances. Cutting out the weekly dinner out, or skipping that second bottle of wine or box of beers will also help you make inroads. If you're not even spending on those luxuries then $5 a week, or $10 a month will show that you mean business. The trick is to not draw from those savings, so only set aside what you can afford to ignore.
2 - Create a 'must have' list for your first home
As your saving plan gathers momentum you might be able to work out a rough budget that you could afford for a mortgage. There are numerous tools online to help you work this out, one of the best is Sorted's calculator.
With a budget in mind you'll then be able to check out the types of houses you like that you can afford. Almost every first home buyer has to make compromises in the home they end up buying and it's important that you, and anyone else you may be buying with, has a firm understanding on the features that are essential, and those that are less important.
You might want a walk-in wardrobe but is proximity to a school's zone more important? A double garage would be lovely but is a cost saving feature like double glazing, or insulation more practical?
3 - Speak to a mortgage advisor
Online calculators are a great way of getting a rough idea of what you might be able to afford but everyone's circumstances are different and only by seeking advice from a professional can you really hope to understand what options are available to you.
If you've been using the same bank for most of your life it can be very easy to talk to them but there are many options out there and shopping around, from bank to bank, can be time consuming, confusing and tiring. A mortgage broker does this on your behalf and at no cost to you. So while you're going about your everyday business, or enjoying the summer they're hard at work finding the best deal for your circumstances.
Your mortgage advisor will also be able to let you know of any additional grants or options available to you that you might not be aware of. Talking to them sooner rather than later can also give you a greater sense of your budget and options before you get too far into the whole process.
4 - Become friendly with a lawyer & real estate agent
Another key partner in your home buying process is both a lawyer and a real estate agent. The lawyer will help you overcome any obstacles and draw up contracts that look after you should you run into a roadblock. They may seem costly but it is often a lot more expensive if things go wrong and you haven't had their support.
A real estate agent can also be super helpful during this time. Like a mortgage broker they will be looking out for opportunities that suit what you're looking for even when you're not. They will often let interested buyers know about a property before it's listed, giving them a head start on houses before they hit the market.
5 - Check out funding options
There are often ways for first home buyers and those building a house to unlock government grants and loans depending on their region and what they're looking to build. Some of these are easier to find than others so, again, it's good to talk about these with your mortgage advisor and to do some research online.
It's also possible for you to get help from your parents/relatives and even use your savings to help offset some of the payments you'll be making once you have a mortgage. Our free guide for first home buyers explains some of these options in more detail.
6 - Bring a friend
When you're looking at houses it helps to bring a friend along too. It helps if this friend has a trades background or has experience in buying a home already as they will often look at the house a bit more skeptically as their situation is slightly different to yours.
That friend is likely to think of things like checking shower pressure, gutters for breakages or blocks, damp patches and weird smells that could indicate a bigger problem. They might even ask questions about how the house fits with your life plans. The great thing about taking a friend is they're more likely to have your best interests at heart rather than other ulterior motives. Take them for a coffee afterwards to get their thoughts properly.
7 - Be realistic
When you're looking at setting a budget for your first home be realistic when it comes to costs and what you can afford. There's no point living in your dream house if every month you're living from hand to mouth and you can't ever enjoy the home you live in.
You might be able to justify cutting out a hot shower every day, tickets to watch the local rugby team or vowing to never take a bath again when you're standing in your dream house during an open home but mortgages last for a very long time and after your 5th month in a row of no Netflix you might start to grow weary of board games.
8 -Look at increasing payments
One of the major ways mortgages become expensive is due to the fact that most are structured so you pay off the interest first before you start to pay off the principal. If, however, you can spend your first year or two making over payments then you won't accrue as much interest and the lifespan of your mortgage will be shorter, or will at least cost you less in the long-run.
Again it's really important to talk to your mortgage broker about exactly how your mortgage is going to be structured but look at whether over paying is feasible for you and ask what this may mean for your loan in the long-term.
It's worth noting that you can only make over payments on a variable mortgage and not a fixed term mortgages. Explanations on what this means can be found in our first home buying guide.
9 - Don't overlook the ugly
When buying your first home your personal circumstances may mean you can overlook the issues of your current living situation.
If you're renting and the house is cold and damp and your landlord isn't proactive in fixing the issue you might consider buying a cold damp house with the plan of being able to put the effort in and fixing it yourself. This is certainly possible but can be costly. Insulation is relatively cheap and easy to install but attic ceiling and underfloor insulation can really reduce heat loss but crummy windows and drafts will mean little of the benefits are felt. The cost of replacing windows and doors can be very expensive.
Likewise any sign of damp can be an indicator of a much bigger issue that could cost thousands to repair and replace. Building reports are so essential and, like with using a lawyer, you might think it's expensive to get one but it's invariably more expensive to not get one.
10 - Use your head, not your heart
This one kind of goes back to the repayments and understanding what you can afford. If you approach the situation desperate for a new home you're likely to put in a bigger bid to end the stress and hassle but you have to make sure you're no over-stretching yourself.
For many first home buyers they're not buying a house, they're buying a home and if you're in that situation you need to make sure you let your head do more of the thinking. You may fall in love with a villa but is it practical for your needs, and will it be expensive to modernise to your requirements? But don't go too far the other way either, just because all you need is four walls a roof and some electricity doesn't mean your house can't be something you're proud to come home to!
Whatever journey you end up going on your mortgage advisor can be with you every step of the way. They've helped dozens of people go through exactly what you're going through and they have answers to almost every question you'll have. Best of all, they're free for you to use!
If you need more information about buying your first home then download our FREE guide . If, however, you're ready to start your home buying journey then contact us today to get started.
This information is general information only and must not be relied upon as legal advice. A disclosure statement is available here.