First home buyer tips from a recent first home buyer

The great Australian dream has felt unachievable for many younger Australians for a long time. Median house prices have exceeded $1 million in many Sydney suburbs. At these prices, saving for a 20% deposit has been a daunting task for most, and – alternatively – having to pay for lenders’ mortgage insurance (LMI) also isn’t ideal.

Disheartened by the steep learning curve of buying or investing in property, not to mention the cost of it, many young people seem to have – understandably – given up on the pursuit of property in favour for short term pick-me-ups like daily barista made coffees, smashed avo on toast, and frequent getaways or ‘staycations’.

For a long time, I felt the same way. But having just bought my first home, and feeling a great sense of relief and certainty for the future, I wanted to share my tips for others wanting to pursue the property dream. The outlook is not so bleak after all! 

Here are a few things you need to know…

Take a deep breath and start your research

Buying a home is the most expensive purchase many people will ever make – it shouldn’t be rushed! It’s not as easy or inconsequential as choosing your next pair of shoes or even car. 

For my partner and I, the location and lifestyle that would come with our property mattered a lot. But we were open to living in many different places, not just the areas we were very familiar with. 

Long before we even decided to buy a property, we routinely went and checked out many suburbs. At that time, we kept a realistic mentality with minimal expectations, but we kept in mind some suburbs that we would like to live in “one day” while saving for a deposit in the meantime. 

Before zeroing in on a property to buy, take a walk around the areas you fancy. You’re going to be a part of a neighbourhood, and it is important to feel comfortable in the area you end up in. Feeling safe was a big one for us, so we actively looked for places where we could take a walk at night without the possibility of murder even crossing our minds!

Tip: make a list of things you must have in your new neighbourhood (as well as your new home) and then the “nice to haves” that you can live without.

Focusing on your must-haves will help you prioritise the things that matter most and keep your search focused.

Use the many free apps and calculators available online

Once you have picked your favourite area(s) to focus on, you can check house or apartment prices in that neighborhood using many real estate applications, such as Domain.com.au or Realestate.com.au. It was just like online shopping but much more expensive.

Tip: look a couple of bus stops away, or even one suburb away, from a popular area or attraction, especially if the area features a train station. Usually it’s still walking distance, but you can save quite a bit!

Once you have a realistic number in mind, start visiting the many free calculators online. Most banks have mortgage calculators on their website, like “How much you can borrow” or “Your monthly repayments”. It will make your decision-making process much easier and you can eliminate the options you cannot afford upfront.

Know your numbers

Some lucky younglings will be able to “borrow” their 20% deposit from the bank of mum and dad, but for the rest of us who are not so lucky, it is time to save, save and save!

The ideal savings goal for a house deposit is 20% of the purchase price, which is a big pain, but you will also need enough to cover buying costs, such as:

• Strata report costs (if the building is in strata)
• Solicitor or conveyancer costs 
• Pest and building inspections
• Stamp duty

These are just costs before settlement. After securing your dream home, there are more costs such as strata fees, council rates, insurance, and potential repairs.

Your budget should not only include the mortgage repayments but also a contingency for all of these costs.

To save for that 20% deposit, you may need to find a higher-paying job/role, take on extra shifts/responsibilities, or finally ask for that promotion you feel you deserve! Maybe you can find an additional income stream and monetise a hobby you have (e.g. baking, video gaming or arts and crafts)?

If these options aren’t on the table, keep working hard and maybe look for savings you can make instead.

In any case, you need to save like crazy, but you need to be reasonable too (so you can stick to it)! You are unlikely to survive long enough on a diet of rice, canned tuna, and stolen biscuits from the office. 

There are many calculators available online that will help you create an easy-to-follow budget, and you just need to stick to it.

Assistance for first home buyers

Budgeting is not all there is. There is also government assistance for a first home buyer that will help with some costs, such as:

• If you are buying or building your first home, it is new, and it is worth less than $750,000, you might qualify for the $10,000 First Home Buyer Grant 
• If you are buying your first home in Australia, and its value is less than $1,000,000, you might get full or partial exemption on stamp duty
• If you are building a new home or substantially renovating your old home, you might be eligible for the HomeBuilder Grant.
• You might be able to use your super fund to save for your first home using the First Home Super Saver Scheme
• Ten thousand people across Australia might also qualify for the First Home Loan Deposit Scheme, which would help purchase a home with only a 5% deposit

Although the road to your first property may be long, with plenty of saving and sacrifice along the way, the satisfaction you will feel when walking through your own doors for the first time will make it all worth it.

I hope these tips provide some useful food for thought as you begin this challenging and rewarding journey!

IMPORTANT NOTICE
This blog post contains general information only and has been prepared by Allworths without reference to your objectives, financial situation or needs. Allworths cannot guarantee the accuracy, completeness or timeliness of the information contained here. By making this information available to you, we are not providing professional advice or recommendations. Before acting on any of the information contained here, you should seek professional advice.