How much deposit do I need? Should I go it alone or use a mortgage broker? How do I know if I’m buying the right property?
For many people, buying a property for the first time can be like taking a step in the dark. There are a lot of different factors to consider and it can be tricky to know where to start.
So to shed some light on your journey, we thought we’d offer these three useful tips to help you get your first home wheels in motion.
1. Consider a mortgage broker
A mortgage broker can help to simplify the borrowing process for you. A home loan specialist, a mortgage broker has extensive knowledge and experience with borrowing from different types of financial institutions and often has access to lenders and loans not normally available to everyday borrowers.
As well as offering you a variety of loan options, a broker can help you select the loan that’s right for you and also manage the process through to settlement, including negotiating on your behalf with banks, credit unions and other credit providers.
Did I mention that they come at no cost to you?
2. Bigger is better!
It’s no secret, the bigger the deposit the better, but mapping out a savings plan and having some financial discipline will take away some of the pain of saving. Typically, the lender looks for a deposit of 20% of the property value. Having this amount or more will maximise your chances of being approved and it means you won’t need to pay for mortgage insurance.
Lenders Mortgage Insurance (LMI) applies when the borrower has less than 20% deposit and is a form of insurance that protects the lender from you defaulting on your loan. It can be quite expensive, so it’s a definite advantage to come up with a suitable deposit if possible.
Ways to accelerate your savings for a deposit could include creating a budget and sticking to it, working more overtime, getting a second job, postponing your annual holiday, foregoing some of those little luxuries like gym membership or restaurant meals, using public transport instead of your car and even moving in with family to save on rent. You should also investigate the grants and concessions available to first home buyers to determine whether you are eligible.
3. Know the property
If you’re buying an existing property, you’ll need to do some thorough research to find out as much as you can about the condition of the property to avoid any problems or additional costs later on.
This may include examining copies of any previous property inspections (the agent must supply these to a potential buyer if asked). You should also visit the property to inspect it in person and commission a property inspection report of your own.
A professional inspection report will tell you the condition of the property and alert you to any pre-existing issues such as termites, leaks, asbestos or structural damage, which could save you thousands of dollars down the track.
Always use a qualified person such as a builder, surveyor or architect to do your inspection reports, as they can spot faults and problems that might not be apparent to an untrained eye.
When you visit the property yourself, check everything you possibly can in the time available. Look for things like sticking windows and doors, signs of damp, sagging ceilings, low water pressure and electrical wiring problems, keeping in mind that anything you find can potentially be used to negotiate a lower buying price.
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