Home Buyers - 10 Important points when purchasing a home - Highlighting the importance and details

1. Assess Your Financial Situation and Set a Realistic Budget  

Why It’s Important: Understanding your financial capacity ensures you don’t overstretch yourself, which is critical for first-home buyers who may not be familiar with the ongoing costs of homeownership.  

Details:  

• Calculate Your Income and Expenses:  

  Review your income, savings, and monthly expenses to determine how much you can afford to borrow and repay.  

  
  

• Factor in All Costs: Beyond the purchase price, consider additional costs like stamp duty (which can be tens of thousands in Australia), conveyancing fees (around $1,000-$2,000), building and pest inspection fees ($500-$1,000), and ongoing costs like council rates, insurance, and maintenance.  

  
  

• Get Pre-Approval: Approach a lender or mortgage broker to get pre-approval for a home loan. This gives you a clear borrowing limit and shows sellers you’re a serious buyer. Be cautious, as pre-approval doesn’t guarantee final approval.  

  
  

• Consider First Home Buyer Grants: In Australia, schemes like the First Home Owner Grant (FHOG) or Homebuilder (if available) can provide up to $10,000-$15,000 in some states for new homes. Check eligibility on state government websites (e.g., Revenue NSW, SRO Victoria).  

  
  

• Plan for a Buffer: Aim to have 3-6 months worth of living expenses saved as an emergency fund to cover unexpected costs or changes in income.   

• For First-Home Buyers: Be realistic about what you can afford. A common rule is that your mortgage repayments should not exceed 30-35% of your gross monthly income.  

2. Research the Property Market to help choose the Right Location  

Why It’s Important: The location of your home affects its value, lifestyle suitability, and future resale potential. First-home buyers often underestimate the importance of long-term factors like infrastructure and growth.   

Details:  

• Understand Market Trends: Research property price trends in your target areas using platforms like Domain, Realestate.com.au, or CoreLogic reports. Look at median house prices, auction clearance rates, and historical growth. For example, Sydney’s median house price was around $1.5 million in mid-2024, while regional areas like Newcastle were closer to $800,000.  

  
  

• Prioritize Lifestyle Needs: Consider proximity to work, schools, public transport, shops, and amenities. For example, if you work in Melbourne’s CBD, suburbs like Footscray or Brunswick might offer better value than inner-city areas.  

  
  

• Evaluate Future Growth: Look for areas with planned infrastructure (e.g., new train lines, hospitals, or schools). Check government websites or local council plans for developments. For instance, Western Sydney is seeing growth due to the new airport.  

  
  

• Visit the Area: Spend time in the neighbourhood at different times of day to assess noise, traffic, and safety. Talk to locals or join community forums on platforms like Reddit to gauge liveability.   

  
  

• For First-Home Buyers: Balance affordability with potential. Regional or outer suburbs may be cheaper but check commute times and resale potential. Avoid buying in areas solely because they’re “hot” without considering your needs.  

3. Understand Your Borrowing Options and Loan Features  

Why It’s Important: The type of home loan you choose impacts your repayments and financial flexibility. First-home buyers may feel overwhelmed by loan contracts and options.  

Details:  

• Compare Loan Types: Decide between fixed-rate (stable repayments but less flexibility) and variable-rate loans (fluctuates with interest rates but often more features). Split loans combine both.  

  
  

• Explore Loan Features: Look for features like offset accounts (reduces interest by linking savings to the loan), redraw facilities (access extra repayments), or the ability to make extra repayments without penalties.  

  
  

• Work with a Mortgage Broker: A broker can compare hundreds of loans from banks, credit unions, and non-bank lenders to find one suited to your needs. They’re typically free as they earn commissions from lenders.  

  
  

• Understand LMI: If your deposit is less than 20%, you’ll likely pay Lenders Mortgage Insurance (LMI), which can cost $10,000-$30,000 depending on the loan size. Some first-home buyer schemes, like the First Home Guarantee, allow smaller deposits (5%) without LMI.  

  
  

• Check Government Schemes: The First Home Loan Deposit Scheme (now Home Guarantee Scheme) allows eligible buyers to purchase with a 5% deposit without LMI, but places are limited (e.g., 35,000 annually). 

  
  

• For First-Home Buyers: Don’t just chase the lowest interest rate. Consider loan flexibility for future changes (e.g., starting a family). Use comparison sites like Canstar or Finder to review loans, but verify with a broker.  

4. Save for a Deposit and Understand Stamp Duty Concessions  

Why It’s Important: A larger deposit reduces your loan size, interest costs, and the need for LMI. Stamp duty can also be a major expense, but concessions exist for first-home buyers.   

Details:  

• Aim for 20% Deposit: A 20% deposit avoids LMI and shows lenders you’re financially disciplined. For a $800,000 home, this means $160,000 plus additional costs. If 20% is unfeasible, aim for at least 10% and explore schemes like the Home Guarantee Scheme.  

  
  

• Use First Home Super Saver Scheme (FHSSS): This allows you to save up to $50,000 in your superannuation for a deposit, with tax benefits. Contributions are capped at $15,000 per year. Check ATO guidelines for eligibility.  

  
  

• Budget for Stamp Duty: Stamp duty varies by state and property value. For a $800,000 home in NSW, it’s around $31,000. Many states offer stamp duty concessions or exemptions for first-home buyers (e.g., NSW exempts first-home buyers for properties up to $650,000). Use state revenue calculators to estimate costs.  

  
  

• Cut Expenses: Create a savings plan by reducing discretionary spending (e.g., dining out, subscriptions). Automate transfers to a high-interest savings account to build your deposit faster.   

  
  

• For First-Home Buyers: Saving a deposit is tough with rising costs. Consider living with family or renting affordably to boost savings. Check if you qualify for stamp duty relief to reduce upfront costs.  

5. Conduct Thorough Property Inspections  

Why It’s Important: A home may look perfect but have hidden issues that cost thousands to fix. First-home buyers may skip inspections to save money, risking costly repairs.   

Details:  

• Hire Professionals: Book a building and pest inspection before signing a contract. These cost $500-$1,000 but can uncover issues like structural damage, termites, or faulty wiring.  

  
  

• Attend Inspections Yourself: Visit open homes and take notes on the property’s condition, layout, and natural light. Check for signs of damage (e.g., cracks, water stains) or poor maintenance.  

  
  

• Review Strata Reports (for Units): If buying an apartment, get a strata report (roughly~$200-$500) to check the building’s financial health, maintenance issues, or upcoming levies.  

• Consider Future Costs: Older homes may need renovations or energy efficiency upgrades (e.g., insulation, solar panels). Factor these into your budget.  

• For First-Home Buyers: Don’t rush to buy without inspections, even in a hot market. If an issue is found, you can negotiate a lower price or walk away. Always include a “subject to inspection” clause in your offer.  

6. Engage a Conveyancer or Solicitor  

Why It’s Important: A conveyancer or solicitor ensures the legal aspects of the purchase are handled correctly, protecting your interests. First-home buyers may not realize the complexity of property contracts.   

Details:  

• What They Do: A conveyancer reviews the contract of sale, checks for issues (e.g., easements, covenants), handles settlement, and transfers the title. Solicitors can also provide legal advice for complex cases.  

  
  

• Choose Wisely: Hire a licensed professional with experience in your state’s property laws. Costs range from $1,000-$2,000. Ask for recommendations or check reviews on platforms like Google.  

  
  

• Review the Contract Early: Before making an offer, have your conveyancer review the contract to identify red flags, such as restrictive clauses or undisclosed defects.  

  
  

• Understand Cooling-Off Periods: Most Australian states offer a cooling-off period (e.g., 5 days in NSW) where you can withdraw from a sale, but you may lose a small deposit (0.25% in NSW). Auctions typically don’t have cooling-off periods.   

  
  

• For First-Home Buyers: Don’t skip this step to save money. A conveyancer can spot issues that save you from costly mistakes, like buying a property with legal disputes.  

7. Make a Strategic Offer or Bid  

Why It’s Important: The Australian property market can be competitive, and first-home buyers need to approach offers or auctions strategically to avoid overpaying or missing out.   

Details:  

• Private Treaty Sales: Research recent sales of similar properties to make a fair offer. Start slightly below your maximum budget to allow negotiation. Include conditions like “subject to finance” or “subject to inspection.”  

  
  

• Auctions: Attend multiple auctions to understand bidding dynamics. Set a strict budget and stick to it to avoid emotional overbidding. Consider hiring a buyer’s agent ($5,000-$15,000) to bid on your behalf if you’re nervous.  

  
  

• Be Prepared to Walk Away: In hot markets like Sydney or Melbourne, competition can drive prices beyond your budget. Have backup properties in mind to avoid desperation.  

  
  

• Understand Market Conditions: In a seller’s market (high demand, low supply), you may need to act quickly. In a buyer’s market, you have more room to negotiate. Check auction clearance rates on Domain for insights.   

  
  

• For First-Home Buyers: Auctions can be intimidating. Practice your bidding strategy with a friend or family member, and don’t let pressure push you beyond your limit.  

  
  

8. Plan for Ongoing Costs and Homeownership Responsibilities  

Why It’s Important: Homeownership comes with ongoing financial and maintenance responsibilities that first-home buyers may not anticipate, impacting long-term affordability.   

Details:  

• Budget for Rates and Insurance: Council rates ($1,500-$3,000/year), water rates ($800-$1,200/year), and home insurance ($1,000-$2,000/year) add up. Strata fees for units can range from $2,000-$10,000/year. 

  
  

• Plan for Maintenance: Set aside 1-2% of the property’s value annually for repairs (e.g., $8,000-$16,000 for an $800,000 home). Older homes may need more frequent upkeep.  

  
  

• Understand Tax Implications: If you later rent out the property, you’ll face capital gains tax on sale. Owner-occupiers are exempt from this. Check ATO guidelines for details. 

  
  

• Energy Efficiency: Consider ongoing costs like heating and cooling. Homes with poor insulation or outdated systems can be expensive to run. Look for properties with high energy ratings.  

  
  

• For First Home Buyers: Factor these costs into your budget to avoid financial strain. Consider a smaller or newer home to reduce maintenance costs in the early years. 

9. Get Home and Contents Insurance 

Why It’s Important: Insurance protects your investment from risks like fire, theft, or natural disasters, which are common in Australia. First-home buyers may overlook this until it’s too late.   

Details:  

• Contents Insurance: Protects your belongings (e.g., furniture, electronics). Combine with home insurance for a discount.  

  
  

• Shop Around: Compare policies on sites like iSelect or Compare the Market. Ensure coverage includes Australia’s common risks, like bushfires or cyclones.  

  
  

• Arrange Before Settlement: Have insurance in place from the day you take ownership to avoid gaps in coverage.  

  
  

• For First-Home Buyers: Don’t skip insurance to save money. A single disaster could wipe out your investment. Ask your conveyancer to confirm when insurance is needed.

  
  

• Why It’s Important: Buying a home is a long-term commitment, and first-home buyers need to consider how their needs may change (e.g., family, career, relocation). Professional advice can clarify complex decisions.   

10. Plan for the Future and Seek Professional Advice  

Why It’s Important: Buying a home is a long-term commitment, and first-home buyers need to consider how their needs may change (e.g., family, career, relocation). Professional advice can clarify complex decisions.

Details:  

• Think Long-Term: Will the property suit your needs in 5-10 years? For example, a one-bedroom unit may not work if you plan to start a family.  

  
  

• Consult Experts: A mortgage broker can access 20–30 lenders to find the best loan, often at no cost to you (they’re paid by lenders). 

  
  

• Understand Resale Potential: Even if you plan to stay long-term, choose a property with good resale value (e.g., near transport or schools). Avoid overcapitalizing on renovations that don’t add value.  

  
  

• Stay Informed: Keep up with changes in interest rates, or government schemes. Speak with your mortgage broker. 

  
  

• For First-Home Buyers: Don’t rush into a purchase without considering the extra financial implications around your property. A mortgage broker can help identify and work out the overall costs involved when purchasing a property.

Final Tips for First-Home Buyers  

Start Early: The process can take 6-12 months, from saving to settlement. Begin researching and saving as soon as possible.  

Be Patient: The Australian market can be tough, with high prices and competition. Don’t settle for a property that doesn’t meet your core needs.  

Leverage Support: Use government schemes, family guarantees (if available), or co-buying with trusted partners to enter the market sooner. 

By following these steps, first-home buyers and homeowners can approach the Australian property market with confidence, minimizing risks and maximizing their investment.

If you have specific questions about any of the steps above or need help in securing your home loan. Contact one of our insightful mortgage brokers today.