First Home Buyers
There’s no doubt home ownership is the great Australian dream. Buying your first home is fun and exciting, but it can be a little overwhelming too. That’s why, 3Carrots is here to help you every step of the way. Our professional brokers will do the hard work to get you on the right track. This is your first property—we need to be able to maximise your purchasing power so you can finally live in your dream home.
How can 3Carrots help you?
3Carrots has a team of experienced mortgage brokers who will help you find the right home loan based on your needs and requirements. We do all the necessary legwork for you, research hundreds of home loan choices from across the market, and present you with the top home loan options for your circumstances.
Your personal 3Carrots broker will help you:
Understand the costs and process – Your3Carrots mortgage broker can explain everything you need to know about buying your first home, including costs, procedures, and how much you can borrow.
Get pre-approval – This will help you, especially if you have only just started your property search and you don’t know how much you can afford. Your 3Carrots mortgage broker can help you get pre-approval so you can plan ahead with a realistic figure in mind.
Apply for concessions – In some cases state governments provide incentives such as First Home Owners Grant or stamp duty concessions. Your 3Carrots mortgage broker can help you apply for such incentives if you’re eligible.
Get your dream home – The process can be gruelling, but your 3Carrots mortgage broker is here to help you every step of the way—from applying for your home loan, doing the paperwork and getting approval, to settling the transaction and moving into your new home.
A step-by-step guide for buying your first home
If you don’t understand what exactly happens when you buy your first house or apartment, below is a step-by-step guide to get you moving towards your dream home.
- Get pre-approval.
Knowing how much you can borrow and how much you can afford to repay will make you ready for the next step. - House hunting.
Once you’ve established how much you can borrow and you have a 3Carrots pre-approval, a maximum purchase price will become clear so it’s time to start looking for a house! - Make an offer or start bidding.
If you find the property that you like, make an offer to buy the property. If the property is up for auction, you can start bidding. Exciting! - Do the paperwork.
Once the seller accepts your offer or bid, it’s time to finalise the deal by signing contracts and paying a deposit. - Moving in.
Congratulations, the loan is disbursed and your purchase settles! You are now a proud owner of your new home.
Determining how much you can borrow
Excited to start searching for your new home? We’re excited for you too! But before you start this crazy adventure, it’s super important that you figure out the costs involved and get your finances ready. There’s no point in finding your dream home and getting emotionally attached, just to find out later that you can’t actually afford it. To save you from future frustrations, here’s a guide for when you’re working on the numbers:
- Make our calculators your best friend.
Check out our easy-to-use home loan calculators that give you a rough estimate of the figures you have to work through. - Apply for pre-approval.
Knowing your purchase limit and how much you really can afford comes handy when you are house hunting or bidding at an auction. A pre-approved loan is usually valid for three to six months, depending on the lender. - Be aware of the criteria.
Usually your credit history, your income, employment history, existing debts or savings will determine how much money you can borrow. - Consult with your 3Carrots mortgage broker.
He or she can show you your home loan options and run you through a borrowing eligibility assessment so you can have a better picture of how much you can borrow, and what you can afford to buy.
Determining how much you can repay
Let’s say 3Carrots get your loan pre-approval for a good amount and you’re now ready to buy. Awesome. Your dream home is now within sight!
But first, an important reality check: you must also think about how much you can afford to repay. If you have used our Home Loan Repayments calculator, it will give you an idea how much your monthly repayments will be for any actual amount you borrow.
In some cases, it may not be prudent just to borrow the full amount a lender is prepared to lend you. You may have a future change of circumstances planned (such as having children) that you should consider. It is wise to check your own cash-flow first so that you are prepared for the future:
- Lay out your budget.
List down all your monthly expenses and see where you can save. Do you really need to have regular holidays or spend so much on shopping? What are the things you can give up for a home? - Prepare for unforeseen costs.
Unexpected things happen in life. You have to be prepared for things like accidents, increase in interest rates, or even unemployment. You should always have financial buffer and it is always advisable that your monthly repayments should not exceed 40% of your gross income. - Consult with your 3Carrots mortgage broker.
You have to be comfortable with the home loan you are getting and its repayments. If you have doubts or second thoughts, don’t back-out yet! Talk to your 3Carrots mortgage broker so together, you can work out the best option for you.
Tips on Saving for Deposit
There are many advantages to having a larger home loan deposit. A good deposit towards a property purchase shows your lender that you have a strong savings history and that you are likely to be a good borrower. Also, a larger deposit means you have to borrow less, which means smaller monthly repayments and less long-term interest charges.
In addition, may a larger deposit may get you access to better home loan deals. These days, many good lenders offer lower interest rates for borrowers with more equity to contribute. So you and your 3Carrots broker are more likely to negotiate a bigger discount on your home loan interest rate if you have a 20 per cent deposit, as opposed to just a 5% deposit.
So if you’re saving for a home deposit, or you’re determined to save a larger deposit before buying your new home, here are some tips:
- Work on your budget.
List down your typical spending for a month and see where you can cut back. Adjust items that you think are unimportant and try to squeeze in some savings whenever you can. Every dollar counts! - Set a savings goal.
Everything becomes easier when you have a motivation. Let your savings goal or target become the motivation you need. Having a clear goal puts your priorities straight and encourages you every time you move closer to your goal. - Pool additional incomes.
Minimise your spending by adding any extra income sources directly to your savings. This may include your bonuses, tax refund, or financial gifts. - Make your money work for you.
Now that you have a considerable amount of savings, you have to put it in a high yielding interest bearing savings account. - Savings first.
Set up an automatic direct debit to your savings account so you won’t be tempted to spend the money intended for savings. - Minimise debts.
It is usually best to reduce your debts as much as you can first, before you start saving. Lenders will want to know the status of your car loan, your credit card limit, etc. A good record will improve your chances of getting your loan approved.
Lenders Mortgage Insurance (LMI)
Lenders usually require borrowers to pay Lenders Mortgage Insurance (LMI) if they are borrowing more than 80% of the property’s value. LMI is a type of insurance that protects the lender, in case the borrower has some delinquency in making loan repayments and the eventual sale of the property can’t cover the entire loan value.
As an incentive to the borrower, lenders generally can lend more if there’s an LMI since it reduces the lenders’ risk. Often buyers prefer LMI than waiting for additional years of saving for a deposit. LMI is usually arranged by your lender and could be added to your total loan amount to lessen the upfront costs.
On the other hand, if you don’t feel like paying for LMI, there are ways you can avoid paying it. One is having a larger deposit and the other one is to have a guarantor if your deposit doesn’t reach 20% of the property value or loanable amount.
Which is better—pay LMI or wait until you have enough savings for a deposit? The answer depends on your personal circumstances and goals. To know more about your options, feel free to contact your trusted 3Carrots mortgage broker.
First Home Owner Grant (FHOG)
The First Home Owner Grant or FHOG is a scheme introduced by the federal government on July 1, 2000. FHOG allows first homeowners to receive a one-off grant if they satisfy all the eligibility criteria. It is funded and administered by the states and territories, and rules or requirements may differ in each area.
To see if you qualify for FHOG, select the location you are buying your first property and click for more information.
- Australian Capital Territory
- New South Wales
- Northern Territory
- Queensland
- South Australia
- Tasmania
- Victoria
- Western Australia
Generally, you may be eligible for FHOG if you are:
- Australian citizen or Australia’s permanent resident
- Going to live in the property you’re buying for the next 12 months
- Buying off the plan or building your first home in Australia (most states)
- Buying the property with another person, you must be both eligible for FHOG
- Having no restrictions as to your income
Give us a call today to talk to one of our 3Carrots mortgage brokers and know more about First Home Owner Grant.
What’s the right home loan for you?
There are many factors to think about in finding the right home loan for you and it’s not just about interest rates. If you factor in the fees and features of a home loan, there will be a significant effect on its actual total cost. Also, in any commitment, it is important that you investigate first, even the small details, so you know exactly what you are getting yourself into.
Below are the questions you need to ask yourself to find the right home loan for you. Be reminded too, that you have to think long-term when answering these questions.
- Am I going to pay the loan throughout the term or would like to pay it sooner?
- Can I stick to a budget and live frugally or do I tend to be extravagant and live beyond my budget?
- Do I prefer a fixed interest rate and know exactly what I am going to pay, or am I okay with interest rate changes?
- Do I think I would want to redraw some money from my repayments to pay for holidays or cars in the future?
- Does having children in the future affect my repayments?
- Have I considered future expenses of my existing children like school fees?
- Am I expecting any bonus or cash windfall at any point?
- Do I have tenure at my job? How secure is it?
- Do I have other sources of income in case I lose my job?
After answering these questions, you will likely know what kind of home loans you should be looking for. There are hundreds of options out there. Your 3Carrots broker manager can help you compare variety of home loans and help you decide which fits you best.
Cost of Buying a Property
Buying a property will involve other costs on top of the property price. A simple guide is to allot an extra 2-5% of the property’s cost to be able to pay for additional buying costs.
These are some buying costs that you need to budget for:
- Borrowing costs.
Some of the upfront home loan costs include an application fee of up to $700, lender’s property valuation costs of around $300, and Lenders Mortgage Insurance (LMI). - Pre-purchase inspections.
It is important to have pre-purchase inspection to be aware of any pest issues, illegal work, or building defects. - Insurance.
Aside from the Lenders Mortgage Insurance, there are some insurance that you can avail to protect you and your home in case of fire, storm, or flood. You can also get an income protection insurance that can pay up to 75% of your income in case you have an accident and unable to work. - Government charges.
You may be subject to government charges like property transfer stamp duty, mortgage stamp duty (unless waived or reduced under FHOG concessions), and mortgage registration fee. - Moving-in costs.
Some costs associated with moving in include gas, electricity, telephone, and Internet connections. If you are moving into an apartment, allow a budget for strata fees. - Legal fees. Although it varies depending on your provider, property conveyancing fees and stamp duty can cost around 2% of the property cost.
If you need help with budgeting for your property fees, talk to one of our 3Carrots mortgage brokers for expert guidance or use our stamp duty calculator.