First home buyers
For many people, buying their first home is guaranteed to be a reasonably stressful experience. Like most things you haven’t done before, there is a bit to learn and mistakes can be costly. The best strategy for finding the right first mortgage is to systematically do your research and be prepared!
Deposit: Where do I get it from?
This is a fair question, especially if you live in one of the more expensive metropolitan cities. You do have options, and some you may not know about:
- Save for your deposit in the traditional way
- Gifted money
- Equity from another property (usually your parents)
- Pledges from relatives
- You may not need one if you have a good income (see section on Getting the Right Loan for You)
- Use your First Home Buyer’s Grant
First Home Buyer’s Grant
Through the state governments, the Federal Government has a grant available to first-home buyers to go towards the purchase of their first property.
Prior to 14th October 2008, first home buyers were entitled to a base grant of $7,000 for the purchase of an established on newly built property.
The grant has subsequently been increased as part of the Federal Government’s economic stimulus package. First home buyers purchasing may now be eligible to receive a $14,000 grant for an established property and $21,000 for a newly built property.
This first home buyer boost will run until September 2009 at which point it will be phased down to $10,500 for established property and $14,000 for newly built. The grant will then revert to the original $7,000 base grant as at January 1, 2009.
Are Honeymoon rates good value?
Honeymoon or Introductory home loan rates will usually offer a low advertised interest rate, usually more than 1% below the standard variable home loan rate. This low rate can either be fixed, capped or variable for the first 6-12 months of the loan. After that, the interest rate will usually revert to the standard variable home loan rate offered by that lender. These types of loan products usually offer limited options and features, which greatly reduces your flexibility. But, if you know your circumstances are unlikely to change, the reduced flexibility may not matter.
One way a lender can offer such cheap interest rates on honeymoon or introductory home loan rates is by limiting the options and features on a loan, which means little flexibility if your situation changes. This may not matter, of course, if you know your circumstances are not going to change.
Always remember that the interest rate is only part of the overall pricing you should be looking at when you take out a home loan. For a slightly higher interest rate, you can get a range of additional features. Things like redraw facilities and internet banking may be features that you are willing to pay for. Also, make sure you investigate the up-front, exit and ongoing fees which can add up to a lot of money, whether you change your mind about your loan half way through or not. Don’t forget to check the comparison rate.
Just because you are a first home buyer does not mean you don’t have access to the same kinds of home loans as other people. If you are borrowing enough (and most metropolitan buyers are), you will have access to a broad range of discounts which are also well worth exploring.
