Some main points need to be considered when buying a first home in Victoria
Budget and upfront costs
Before going too far, you should have a clear view of your financial situations and what you can afford to buy. So you have to consider the following factors that may affect your budget plan and affordability.
- Stamp duty: the tax amount depends on the state you live in and applied on the purchase value of the property. You can get an exemption or discount if buying property less than $750k (in Victoria)
- First home-owner grant is a little extra help from the Government to offset the effect of GST on homeownership. You can use the amount of 10k or 20k (if buying in regional areas) from this support to put in deposit or any unexpected fees during the process.
- Legal and conveyancing fees (around $1000 to $3000) and other costs may occur before moving or during living there such as council rate, home insurance, strata fees, utilities, and cost related to repair or maintenance.
Saving for deposit
When you apply for loans, the bank would want to see evidence of your savings for three to six months and this would help you to show you good expense habit. Basically, you need to show that you have 20% of the purchase price or 10% with lender mortgage insurance. Furthermore, your loan serviceability can be impacted by anything you have on payment plans such as existing loans, credit cards and even recently financial support like Afterpay, Zippay. Hence, it is good to have a financial budget and plan to follow within a few months before you actually buying your first home.
Loan pre-approval
Before looking for a specific house, you should work with mortgage broker or bankers to get pre-approval for home loans. More than half of Australian homeowners have used mortgage brokers because of convenience as they have a better understanding of the loan market and would help to deal with different lenders for your best interests. The major papers you need at this stage are to verify your income, the banks would ask for 2 pay-slips, latest bank statements, and any other documents to confirm your stable earning over an extended period of time.
House searching and inspection
Before getting to any contract of sale of joining bidding wars, you should do some researches about the areas you want to live. Afterwards, narrowing down to 2-3 suburbs that have price range is affordable for yourself. Creating a checklist or filter with all the critical features you need, this would help you to choose which properties to go for inspections. If you are interested in a particular property, you can arrange a building and pest inspection with average cost $500- $700 for peace of mind that the property is in good conditions. This is a good time to appoint a solicitor or conveyancer to help you with legal documents and related matters.
Sign the contract and obtain full loan approval
When the contract is exchanged at auction or private sale, 10% of the purchase price should be paid, and settlement is generally 2-3 months from the date of exchange. Cooling-off period: Depend on the state in which the property is located, most buyers of residential property receive cooling-off period (with some exceptions like buying at auction). In many cases, the contract you exchanged and accepted by the vendor, you would have the condition of “Subject of finance”, then you can have time to gather all documents and send to mortgage brokers/bank for full-approval. There is a number of things you should be considered:
- Interest rates: is it fixed-rate or variable rate?
- Repayment type: ‘principal and interest’ or ‘interest only’ for a certain period
- Term of loan: usually 25-30 years
- Other features: redraw funds, offset account, whether you can make additional payments and how often the interest is calculated?
Settlement
One week before settlement, it is recommended that you physically perform a final inspection to make sure that the house is still in the condition that you have seen before. This is also to make sure that the owners or tenants already moved out and nothing wrong with the light fitting or doors, windows. Besides, the house insurance is required on or before settlement occurs. Your solicitor will arrange the settlement with the vendor’s solicitor and liaise with your lender to organize for the remaining funds to be available on the time and day of settlement. On settlement day, your solicitor will contact you to let you know that settlement has taken place. They will also send you a Statement of Adjustment to show you how the funds have been paid to all parties.