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.

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!

The post What to Expect When Buying Your First Home appeared first on The Home Run.

Given this, it should come as no surprise that whether you are looking to become a first home buyer or simply looking to upgrade to a bigger house, your home deposit should be the number 1 thing you need to decide on. So, how can borrowers build bigger deposits? What options are there out there? Super? Deposit Bond? What else?

1. Budget

If you take nothing else from this article, then at least take this with you. Making a budget is the best way of saving money effectively and in a timely manner. Most people think that if they go through their month normally and at the end of the month put in savings, everything they have leftover, they will be able to save the money they need for their home deposit. That practice has shown time and time again its ineffectiveness. What works best is simply writing down your income and your current expenses on essentials- these include rent, bills, insurance payments, food, and then deciding on an amount that will go into savings each month. That way, at the beginning of the month, you will be putting towards your deposit the maximum amount that you can allocate.

2. Cut Down on Expenses

When making your budget, a big decision you will need to make is which expenses are truly necessary and which ones you can go without. It may be a good idea to consider things like moving to a cheaper apartment if you are renting or cutting down on all those subscription services you are not actively using. The funds that you save from this can then be redirected towards your new home.

3. New Income Sources

If you are looking to save even faster, you may want to consider finding additional income sources. These can include a new part-time job or even some easier side endeavours. For example, if your current home has a spare room that you are not using, you could consider renting the space out on Airbnb or through a similar service. The additional income can go straight into your savings account, and it can truly help you build up your deposit even faster.

4. Superannuation or Deposit Bond

Superannuation can be a great way of not only saving money but having that money grow through a reasonable interest rate and return on your investment. Super is mainly known as a retirement plan, but a part of superannuation was the creation of the First Home Super Saver Scheme. This scheme allows new home buyers to make contributions of up to $15,000 per year, and the account can, in total, have contributions for up to $30,000. Once you are ready to purchase your first home, you can take this money out with the returns it has earned and put it towards your first home. One of the main benefits is that super contributions are taxed at a lower rate, which means that more of your income will be going towards your savings.

A Deposit bond, on the other hand, is a type of insurance policy that is used in place of a cash deposit temporarily. The deposit bond shows your commitment to purchase the property. Using one, you can delay paying your deposit until the settlement is ready. This could buy you some extra saving time if you need it. Your mortgage broker should be able to assist you with determining whether a deposit bond could be a good idea for you.

5. First Home Buyer Help and First Home Buyer Stamp Duties

Deposits can be a big thing for first home buyers who are usually looking to upgrade their living situation as they are growing their family families. Often, they have just started a job, so savings is really a significant consideration. The First Home Owner Grant (FHOG) is an Australian state scheme that assists first home buyers to cover some of the costs of purchasing a new home.

Apart from the FHOG, first home buyers are also able to save money on stamp duties. This scheme can also be of service to those looking to maximise their savings to save up for a larger home deposit. Once again, both this scheme and these incentives are something that you can discuss with a broker to see what is available to you and what you are best suited for and what will help you reach your target home deposit faster.

Final Thoughts

Whether you have bought a home before or you are a first home buyer, there are many options available that can help you in your journey towards saving enough for your home deposit. Budgeting can be one of the most useful tools for those wishing to save for a new home. Increasing your income sources can also be a great way of achieving your dreams even faster. The government has also set different programmes that can help you with saving if you are a first home buyer, so if nothing else, don’t be afraid to look around and do your research while saving for your home deposit.

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!

The post 5 Things to Consider When Saving for a House Deposit appeared first on The Home Run.