Purchasing your first home will be one of the most significant investment decisions that you will make in your life. It will also be one of your most challenging endeavours as your first attempt at homeownership will of course be, unfamiliar waters. So it is but typical for many first home buyers to get that feeling of uncertainty, difficulty, and even doubt. As a mortgage broker, I never sugar-coat the scenario whenever providing consulting services to first home buyers. But, I also make it a point to assure them that with the right kind of information and guidance, first home buyers can definitely equip themselves to boldly enter the market and make solid steps towards fulfilling their dream of finally owning their first home.
As every purchasing story is unique, there is no one formula when it comes to buying your first home, but in this blog, I want to share with you key items that you need to be mindful of. I always want to prepare my clients by giving them a clear picture of the field to better prepare them for the next stage. So, read on and let’s find out what your considerations should be if you are planning to buy your first home soon.
First Home Buyers are Currently Driving the Property Market
Despite the pandemic, the Australian property market is seeing growth and boom, thanks to first home buyers. They are currently dominating the market. This is influenced by the historically low interest rates that are likely to stay until 2024 and by more government grants directed specifically towards first home buyers. Efforts to enable this market segment to purchase is ongoing that is why, there is no better time to buy than now.
If you are interested in reviewing what government support are available to you, it would be helpful to check the National Housing Finance and Investment Corporation (NHFIC)’s website. Find out more about the First Home Loan Deposit Scheme (FHLDS), the New Home Guarantee Scheme (NHG), and the First Home Owner Grant (FHOG). We will dissect these different government funding initiatives in a separate blog, but if you need some help determining which grant is best for you, it is best to consult a trusted mortgage broker.
Which is Better for First Home Buyers: Auction or Private Treaty?
As a first home buyer, your choice is significantly driven by your budget, preferred location, preferred dwelling type, and preferred payment terms. Oftentimes, wherever you are led by these factors, that property becomes your main choice.
But some first home buyers are very intentional when it comes to choosing between buying through an auction or a private treaty. There is a big difference between these two, so it is recommended that you understand how they could impact your first home purchase.
A property that is being sold through an auction gathers all interested buyers for them to make their bid. The highest bidder wins, and the sale is usually sealed on the day.
On the other hand, a purchase sold through a private treaty means there is a specific price that the seller wants to sell the property for. This is typically announced in public listings, in promotional materials like a website, or are readily communicated by the real estate agent.
A common misunderstanding is that in a private treaty, the amount is non-negotiable hence, many first home buyers back out quickly so then they lose an opportunity. If you are interested in the property, you can make a “conditional offer” which tells the seller that you may change your offer later on as you may still be working on a few other things. Some of these may be getting pre-approval, studying the property report, inspecting the property, or simply because you are also checking other property options.
But do not expect the seller to hold on to your “conditional offer” that long. Another offer from a different buyer could surface, and the seller might find this more satisfactory than yours. Proper timing matters and this is where the assistance of your real estate agent may come in handy. It would also be wise to actively work with your lender if you are going direct or with your mortgage broker to get pre-approval fast.
I have an upcoming blog that will detail the auction process, but in the next section, I hope to provide you with some basic tips on what to anticipate when you are joining an auction for the very first time.
Auction Tips for First-timers
You can expect auctions to be very eventful – it will really require your attention, and if you are keen to win, you have to pack some tactics up your sleeve. Again, the highest bidder wins.
If you are a first home buyer and is attending an auction for the first time, you might want to take note of the following:
- Unlike a purchase through a private treaty, there is no “cooling off period” so always bid what you can afford. Always bear your budget in mind. Do not overestimate as this might cause deficits which even your loan may not be able to cover.
- Research ahead on how much property costs within your desired location. Check out listings online and make sure to gather pricing options from different sources be it from real estate agents, property developers, and even published rates in property magazines. The auction may steer way up the actual market value of similar properties within the area, and if that happens, are you willing to accept?
- Auctions can get emotional, stressful, and on some occasions, can cause lots of headaches. Many say that it’s like gambling, almost like poker. If so, how will you play? How will you present yourself to the other “players”? The best go-to advice is to stay calm. It’s better to start the game with a clear mind, a relaxed aura, and an optimistic attitude. As mentioned earlier, attending an auction needs your attention and 100% participation. Study the people around you but calculate their moves. Exude smart and professional. Do not engage in unnecessary activities like chatting and posting on social media. Avoid anything that will take your focus away from the game.
- Proper timing is again best when bidding. If you are a first home buyer, wait until the final calls are made, then make your offer. Make small increments to your offers so that you get to stay long in the auction without exhausting or burning your budget fast.
Closing the Deal
Whether you are purchasing through a win from an auction or through a private treaty, know that there are still a few more steps to accomplish before calling it a closed deal.
Auction or private treaty, you need to pay a deposit. Most contracts require a 10% deposit, but every sale is unique so again, this is another detail that you need to confirm from the seller or the real estate agent beforehand – it could be lower or higher than 10%.
The day that you pay the deposit is the day you sign a contract with the seller. Both you and the seller receive a copy of the contract hence the term, “exchange of contracts”.
Settlement Day
Well done! As a first home buyer, you did a great job! You have now arrived on the settlement day, and it only means that you are now the official owner of the property! On this day, you would have received the title of the property with your name on it. Expect this 6 weeks after the exchange of contracts. Along with the title is the key to your new home. How exciting!
What is Stamp Duty and are First Home Buyers Exempted?
Stamp Duty is the tax charged by the government to certain documents and transactions, such as purchasing a new home. In home buying, the stamp duty is the buyer’s obligation and is based on the price of the property. It varies per state. You can find more information here, or you can use this calculator to compute for your stamp duty.
Stamp duty is an additional expense paid on top of the cost of your purchased home and many first home buyers find this as an impediment to fulfilling their dream. Many feel the financial pressure, most especially they know that this is due a month after settlement. So the common first home buyer question is, will I be exempted from paying stamp duty? Is there a way to avoid it? Well, yes and no. It depends on the state you’re in.
| State | Is Exemption Available for First Home Buyers? | More Information |
|---|---|---|
| NSW | FULL EXEMPTION or CONCESSIONAL RATE of stamp duty may be payable under the First Home Buyer Assistance Scheme (FHBAS) | Source |
| VIC | EXEMPTION AVAILABLE for properties valued at $600,000 or less | Source |
| QLD | EXEMPTION AVAILABLE for properties valued at $550,000 or less | Source |
| ACT | EXEMPTION AVAILABLE but should meet the Income thresholds set by the state | Source |
| SA | NOT AVAILABLE | Source |
| WA | EXEMPTION AVAILABLE for properties under $430,000 or vacant land under $300,000 | Source |
| TAS | 50% DISCOUNT AVAILABLE for properties valued at $500,000 or less and were purchased between 16 March 2021 to 30 June 2022 | Source |
| NT | Recently closed last 30 June 2021 through the THOD Program | Source |
After Moving Into Your First Home
You made it! Dream come true at last.
The journey towards buying your property may have been long and challenging but you’re finally here. Congratulations!
So, what’s to expect after this? What’s the next stage for you after this point?
I typically hear stories of first home buyers who eventually become investors after a few years. Upgrading to a bigger home is also a usual practice, so bottom line, your journey does not end here. Enjoy your first home, have yourself and your family settle in it comfortably, and make lots of memories in it. But never lose sight of the market. Stay updated about real estate and of the developments within your suburb, postcode, city, or much better of the entire state. Keep abreast of banks or even financial activities. This way, you stay as a smart property owner.
The Home Run Podcast is a newly launched show for Aussies who are about to start their journey towards homeownership. If you are a first home buyer, this is your go-to show for anything related to mortgage to help you achieve that great Australian dream of finally owning your first home. To listen to any of our past and recent episodes, you may check this page. To be the first to know when we release a new episode, subscribe to our mailing list to receive our updates. Thank you, and we hope that you enjoyed this blog!
