First Home Buyer’s Mortgage Broker

First Home Buyer

Congratulations on finally taking this step! Buying a first home is a big deal for many Australians who spend years dreaming about it. At ARG Finance, we appreciate that this momentous occasion can be exciting and overwhelming at the same time.

If you’re buying your first home, you don’t have to feel stressed or anxious, as we’re here to provide you with expert knowledge and advice on picking the right loan.

Our first home buyer mortgage broker can compare hundreds of loans from a wide variety of lenders, working closely with you to find the right one for your needs and circumstances.

Whether you need help with the first home buyer’s grant in VIC or require assistance selecting a home loan, we can help.

How Much Can You Borrow & Repay?

Before starting to look for your dream home, you’ll need to work out two very important aspects –your borrowing capacity (how much can you borrow) and how much you can afford to repay.

Your borrowing capacity depends on your income, financial commitments, loan type, savings, credit history, employment history, assets and other factors. Knowing your borrowing capacity will help you narrow down your property search and determine what your financial commitments will be.

Tip: For buying a property through auction, consider applying for a pre-approval.

Home Loan Deposit

A home loan deposit is perceived as your ‘contribution’ to the purchase amount of your desired property and will determine the type of loan and the amount you’re eligible for to buy your home. The deposit is generally a percentage and depends on your individual circumstances and lender’s criterion.

Various factors that count towards a home loan deposit:

Genuine Savings

Genuine savings are cash stashed away into an account for a period of at least three months. These savings act as evidence to the lender of your regular repayment ability of a home loan.

Lenders are often willing to offer loans of up to 97% of the property’s value. However, most appreciate a good history of general savings of at least 5% of the property’s value.

Other Investments

Other investments that count towards savings include:

  • Term deposits
  • Shares
  • A gift of money from a close family member (perceived as non-¬repayable)
  • Inheritance
  • Equity in an existing property

Generally, all of these savings must be held in a savings account for a period of at least three months to be counted as genuine savings.

RECEIPTS OF REGULARLY PAID RENT

For your rental ledger to become a proof of your genuine savings, you should:

  • Still be renting when applying for the loan
  • Have a rental ledger of a minimum of 12 months within a single property
  • Currently be leasing through a registered real estate agent

Note: Not all lenders accept rental repayment history as genuine savings. Therefore, it is advisable to talk to a first home buyer mortgage broker who can look at and evaluate your unique circumstances to help you identify the right lenders and first home buyer’s loan type for you.

Lender’s Mortgage Insurance(LMI)

Loan to Value Ratio (LVR) calculation is used by lenders to assess their risk of lending a loan to you. It considers your borrowing amount against the value of property you’re wishing to purchase. A higher ratio means higher risk for the lender.

In general, if your LVR score is more than 80% (i.e., if you want to borrow more than 80% of your desired property’s value), the lender will ask for an LMI premium. This premium, paid by you, will insure the lender against any loss if you’re unable to pay off your loan or default in payment terms.

An alternative to an LMI premium can be a family security guarantee; a family member with sufficient equity in their home can use this equity as a security guarantee for your loan.

First Home
Owner Grant

For those eligible, the First Home Owner Grant (FHOG) is a fabulous bonus to help budget the purchase of the first home. However, factoring it correctly into the calculations is important.

The FHOG is included while calculating your Loan to Value Ratio (LVR) and thus can avoid LMI premium so long as the FHOG coupled with your other savings add up to at least 20% of the property’s value.

Note: The first home buyer’s grant in Melbourne/Victoria is paid only when the construction stage arrives. Therefore, you must not factor it into your land purchase calculations.

Since the regulations and grant value vary from state to state, be sure to consult a mortgage broker to assess your eligibility for the first home owner’s grant in Melbourne/Victoria. They will also work with you in planning the purchase to ensure that everything is done correctly.

Picking The Right Home Loan for your needs

Types of Home Loan Features

MUST HAVES GREAT TO HAVE
Extra repayments with no fees – These repayments help you pay off your mortgage sooner at no extra charge. Redraw facility – This allows access to the extra repayments that you’ve made in case of an emergency.
Portability – This allows you to take another loan on a different property when you move house without having to pay break costs for your older loan or stamp duty. Mortgage offset – An offset account helps your savings reduce your loan interest charge. While calculating interest, savings are deducted from the loan, so your interest charge decreases with every repayment.

Other loan features

  • Offset account
  • All-in-one loan account
  • Professional package
  • Direct salary credit
  • Repayment holiday
  • Switch to fixed rate
  • Top­up

Additional associated costs

As a general rule, have a budget of approximately 5% on top of your home’s purchase price for additional things associated with buying a house, such as:

  • Pre-purchase inspections for pests and construction faults or defects, illegal work, insurance, disputes, levies, history of repairs, etc.
  • Borrowing costs – Loan application fee (~$700), Lender’s property valuation fee (~$300), and Lender’s Mortgage Insurance (LMI) (these fees can be reduced or made nil depending on the bank’s own discretion).
  • Government charges – Stamp duty, property transfer fee and mortgage registration fee.
  • Insurance – Home and contents insurance, mortgage protection insurance and income protection insurance.
  • Legal and conveyancing fees – (~ 2% of the price of the property)
  • Moving in costs – Furniture removal, utility connections, strata fees and postal redirection.

Note: These figures are indicative only and can change based on market conditions and individual circumstances. Reach out to our mortgage broker for first home buyer for more accurate estimates.

The home buying process

Here are the steps that people usually follow when buying their first home:

STEP ONE: GO FOR A PRE-APPROVAL OR APPLY FOR A FORMAL APPROVED LOAN (UNCONDITIONAL)

Once you have decided what type of loan for first time home buyers suits your lifestyle and individual circumstances, you can apply for a loan and expect full approval within a few weeks. Every bank is different when it comes to processing times, but having us by your side can make things play out more smoothly, as we follow-up on your behalf to expedite the process.

STEP TWO: START LOOKING FOR PROPERTY

Make a list of property features that you will be looking for. This can be a good head-start and help you weigh the property vs. the features you want. Consider the condition of the property, location, suburb value, upcoming developments, noise, parking, outlook and privacy before you proceed. This also helps you narrow down the properties for which you can place an offer or bid during auction.

STEP THREE: ONCE YOU FIND A SUITABLE PROPERTY, MAKE AN OFFER. IN CASE THE PROPERTY IS UP FOR AUCTION, PREPARE YOURSELF TO BID.

Making an offer can be quite nerve racking. However, you must always play it cool.

Private sale: Don’t let the emotions of finding your dream home take a toll on you. Make sure you take your time to make informed decisions. It might cost you around $500 to arrange a property inspection, but it could save you hassle down the track. Be careful to identify any defects to negotiate the price, as some issues might not be repairable and you may have to work out whether or not to proceed. Also, discuss the timeframe of moving in so you can plan other things accordingly.

Auction: If you’re buying at an auction, it is suggested to not place a bid until your solicitor has given you the okay. Also, a pre-inspection is indispensable here. Stick to your limit, as any interest change might put you at a greater risk. Keep your cheque book ready with 5¬-10% of the purchase price to be deposited immediately after you win the auction. Paying a deposit on auction is generally required, and buying at auction is unconditional.

STEP FOUR: IF THE OFFER IS ACCEPTED, EXCHANGE CONTRACTS.

Private sale: A deposit is given at the time contracts are signed after the offer has been accepted. Contracts are negotiable and conditional, with a cooling off period that can vary from state to state.

Auction: A deposit amount is given right after you win at the auction and the contract is unconditional. This means arranging a pre-¬purchase inspection prior to coming to the auction is essential.

Once the contracts are signed, there are a few more steps, including providing documents to the bank for final approval, organising conveyancing to conduct final checks and prepare for settlement time, etc. While the list goes on until you have the keys upon successful settlement, let our first home buyer’s mortgage broker do the rest and help you prepare for moving into your home.

STEP FIVE: CONGRATS!

You now have the keys to your dream house. You can now move in!

Frequently Asked Questions

How do you apply for the First Home Buyer’s Grant?

There are several steps involved in applying for the FHOG in Melbourne and greater Victoria. Firstly, it’s important to determine your eligibility by checking with government authorities for up-to-date information. At the very least, you’ll need to be an Australian citizen or permanent resident, 18 years old, and have never owned a property in Australia.

After finding a suitable property, you’ll need to apply for pre-approval from a lender and lodge an application with the State Revenue Office of Victoria. Supporting documents such as a copy of your pre-approval, proof of income and identification will need to be submitted as part of this process. Approval can take four weeks, after which you can settle the purchase and receive the grant.

How much is the First Home Owner’s Grant in Melbourne?

The FHOG in Melbourne is currently $10,000. However, government policies and grant amounts can change over time, so it’s important to check this amount before applying.

 

Schedule a Consultation Today

If you’re a first home buyer in Melbourne, our mortgage broker for a first home buyer can help you navigate the process. Contact us today to schedule a consultation.