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Tips for First Home Buyers in Australia
Posted May 12th, 2010
and last modified April 20th, 2012
If you’re a first home buyer in Australia then you’re about to navigate your way along a path that many have traveled before. Although you’ve heard a lot in the media about first home buyers and received advice from just about everyone you know about buying your first home, the best way to ‘learn the ropes’ is to dive in head first. Interest rates may be rising, the government grants may not be as attractive as they were in recent years and property prices may seem out of reach, but a few simple tips below can make the process a much simpler one.
Featured First Home Buyers Home Loan
Illawarra Home Loans – Bank Beater 95% Plus Home Loan is a great option for your first home or your first investment property. Borrow up to 95% of the property value plus you have the option to add the LMI onto the loan.
- Interest Rate of 6.26%
- Comparison Rate of 6.28%
- Application Fee of $0
- Maximum LVR With LMI: 95%
- Minimum Borrowing: $100,000
- Maximum Borrowing: $750,000
Types of First Home Buyers in Australia
As a first home buyer in Australia you could be:
- Buying an established home. If you want the ease of moving into a home which is already landscaped and liveable then you may consider buying an established home. Buying a home which has already been built has the advantage of being in an established area with established streets, footpaths, nearby parks and importantly, shops and transport.
- Building your own home. If you would prefer to put your own stamp on your home from the beginning then you want to build your first home from the ground up. Choosing the block and the neighbourhood, the street and the orientation, choosing the plan and the builder, then choosing everything from the doorknobs to the paint colours, the pavers to the curtains and everything in between. When you move in there will be no renovations to do because you will have made the changes easily while your house was still on the plan, you won’t need to knock through rooms or put in a new kitchen everything will be just as you have dreamed and brand new.
- Undecided about whether to build or buy? The benefits of buying an established home may appeal to you until you go down that path and see just how many homes really do need a new kitchen or a bigger bedroom. However, as you start to look into building your own home, the horror stories of ‘lazy builders’ ring in your ears and you may think it is easier to buy a house you can move into right away instead of nine months down the track. It is easy to see-saw back and forth between the pros and cons of both buying and building and you are not alone in your confusion. At the end of the day you need to be happy with your choice now and into the future so take all the time you need to decide.
- On the road to a strong deposit. Whether you have been planning to allocate your savings to a first home deposit for years, or whether you have simply been making regular contributions and have now decided your savings balance would make a healthy home loan deposit, if you have an established savings routine and a strong savings balance you are well on your way to being in one of the best positions a first home buyer can be in Australia. You now have the luxury of choice because you can choose from a range of loans and you can take your time in finding the right loan and the right home, or you can move at any time because you know you have the funds to back up your choices.
- Someone who never really thought about how much a first home deposit really needs to be. Very few Australians really fathom the size of the deposit required to get them into the first home of their dreams. You may have underestimated the amount of deposit you need because rising interest rates and rising house prices have gotten away from you too. However just because you don’t have tens of thousands of dollars in the bank doesn’t mean you can’t buy your first time, you may just need to shop around for a loan which requires less of a deposit, and readjust your ideas about what your first home will look like, and be more willing to start much smaller, or put in the work to renovate that kitchen or knocked down that wall.
Top First Home Buyer Home Loans
| Home Loan | Details | Interest Rate (p.a.) | Comp Rate^ (p.a.) | App Fee / Ongoing Fee | Max LVR | Min & Max Borrowing | |
|---|---|---|---|---|---|---|---|
 Illawarra Home Loans Bank Beater 95% Plus Home Loan |
Only deposit 5% of your loan amount so you can get your home sooner. | 6.26% | 6.28% | $0 / $0 | 95% | $100,000 / $750,000 |
 
|
 State Custodians Mortgage Company Standard Variable Offset Loan |
The First Home Buyer Loan of the Year for 2011. | 6.02% | 6.23% | $0 / $345 | 95% | $150,000 / $1,000,000 |
|
 Loans.com.au – Dream Loan Express – Variable Home Loan (80.01% -95%) |
A home loan offer with $0 application fee and one of the lowest available home loan interest rates in the market. | 6.20% | 6.22% | $0 / $0 | 80.01% – 95% | $50,000 / $750,000 |
|
Illawarra Home Loans Bank Beater Home Loan |
A great offer to pay off your mortgage sooner. A low variable rate and a further 0.5% rate cut after 5 years. | 6.07% | 6.35% | $0 / $345 | 90% | $250,000 / $1,000,000 |
|
 HomeStar Advantage Loan |
Fully featured loan with flexible repayment options. | 6.28% | 6.28% | $0 / $0 | 95% | $150,000 / $2,000,000 |
|
 Community First True Basic Home Loan |
A great loan for the first home buyer offering a competitive rate and no annual fees. | 6.59% | 6.68% | $500 / $0 | 95% | $100,000 / $1,000,000 |
|
 Super Rate Fee Saver Home Loan |
Take advantage of this low rate for the life of the loan. | 6.25% | $0 / $0 | 95% | $50,000 / $2,000,000 |
|
So as you can see, first home buyers in Australia come in an endless range of shapes and sizes so just because you think that your first home buyer needs are unique, unaffordable or unmanageable, that’s probably not the case at all. All you need to do is view the Home Loan Finder comparison tables here and you will start to get an idea of the range of unique home loans available to first home buyers. You can then follow a secure link to enquire about your chosen loan or to apply today if you’ve made the decision.
First Home Buyer Survey Results
Common real estate advice states that you cant make a bad purchase or a bad investment when you buy property as long as you get into the market you are pretty much assured capital growth. Unfortunately many Australian first home buyers would disagree with that piece of advice, because one in three have said they feel they bought their home too soon.
A survey of first home buyers by Mortgage Choice has found that:
- One in three first home buyers, 33% of them, wishes they had looked around more before they bought.
- More than a quarter of first home buyers, 28% said they regretted the area in which they bought.
- More than a fifth of first home buyers, 21% wished they had waited until they were in a more comfortable situation before buying.
- Home buyers also regretted their budget constraints and 18% of first time buyers wished they had waited until they could afford their dream home.
- The government grants helped many first time buyers who wouldnt normally have been able to afford a home, and this support did not go unnoticed by the buyers, as 17% said they felt influenced by the boost to the First Home Owners Grant.
- At the same time, only 4% regretted taking on the extra debt, coming back to the old adage that you cant make a bad property purchase.
- The greatest concern of first home buyers was that 47% were worried that they wouldnt be able to afford their repayments, and 43% were worried about being committed to such a large financial obligation for such a long time.
- Hindsight was 20-20 for 26% of respondents who thought they had bought the wrong home.
Affordability and Travel Time with Your First Home
A cheaper house a long distance from where you work and where the kids go to school may well turn out to be the more expensive in terms of travelling just to live a comfortable basic lifestyle:
- Transport: As the price of petrol increases the lack of public transport will be a real concern in making your decision to buy in a certain area. First home buyers what to look for is that the cost of running your car long distances each day could well infringe on your ability to keep up with the loan repayments, particularly during times of interest rate increases.
- Shops: We all have to eat and buy things in the consumer led society of today and no matter what you think today, living in close proximity to a shopping center is as important today as it was in grandmas day when she and pa moved off the farm into town to be closer to the towns shopping centre. Keep it in mind.
- Schools: As your children grow and move from kindergarten into primary school and then from high school into university you will need to be reasonably close to such facilities. The roads will get busier as our population grows and it will be more costly to run the kids to school each day, especially as they get older. Ensure that public transport can get them there when they are able to travel alone if you cant buy your house close to schools.
- Work: We all have to go to work and if you cant live nearby your workplace you once again should satisfy yourself that the available transport system will get you there.
Future expansion: As your family grows your first house may well prove to be too small for the changing circumstances so look into the future and satisfy yourself that if need be you can extend.
Financial Tips For First Home Buyers
To ensure you dont miss out on what you are eligible for and to help give confidence to first home buyers, the following tips could be of great assistance:
- Plan your budget. There is nothing more important than planning a workable budget and sticking to it when contemplating buying your first home, as well as continuing with a revised edition once you have successfully pocketed the keys. It will be through sticking to a budget that you will get to understand how much you will be able to afford each week once you get down to organizing your home loan.
- Know your limitations. Whatever you do, dont buy what you cant afford. It is easy to convince yourself that you will only have to struggle for a couple of years and then everything will be alright once your promotion comes along. What if something were to happen in the meantime, or the promotion never came. You could stand to lose everything and you will not have the benefit of the First Home Owner Grant and any other first home buyer incentives the second time around.
- Save the biggest deposit that you can put together. The saving of a deposit will help you in two ways. First it will show your potential lender that you can exercise financial discipline over a period of time and secondly the bigger the deposit the larger the equity you have in the property right from the start. This means you will pay less interest. One of the best ways to do this is to take out an Australian Government First Home Savings Account. This special savings account can be obtained through most major banks, credit unions and building societies. It is only taxed at 15 percent and the government contributes an amount equal to 17 percent of anything saved up to the first $5,000 annually. It is presently capped at $80,000.
- Make application for the First Home Owner Grant early. The most appropriate time to apply for the First Home Owner Grant is at the same time you apply for your home loan. You can lodge your grant application through most lenders, if they are an authorized agent, and able to receive it. If you do this it will be processed faster than if you had sent it directly to your relevant State or Territory Revenue Office, the government authority that administers it. In most cases if you do this the grant will be processed by the time of settlement or if you are building, by the time your lender will be paying over the first scheduled construction loan payment If you miss out you will still have 12 months from settlement, or from the completion of the building, to do so. Even then, in special circumstances, the commissioner can extend this time limit further.
- Rid yourself of excess debt. Dont make the mistake of applying for your first home loan while you are carrying excessive debt. Do away with any credit cards you dont really need, finish off you car payments, even sell it if you have to and buy a cheaper car. Make your home loan your top priority. It is also a good idea to factor in any potential interest rate increases to see where it would leave you.
- Be a cynical buyer. Dont necessarily believe all you are told. Make sure you carry out thorough building and pest inspections and find out what prices similar houses are selling for in the same locality. If you do your research properly you should be pretty right.
- Make certain you receive all that you are eligible to receive. The various state and territory governments also offer their own incentives to first home buyers in the way of grants of their own, as well as waiving or giving generous concessions off the costs of stamp duty imposts. Make sure you know what is available in the locality you are buying your first home.
Related posts:
- No Incentives, No Worries – 2010 Is Ripe For Home Buyers
- Tips For First Home Buyers at Auctions
- Home Alone: Can Single Income Buyers Afford a Home?
- Many 2009 First Home Buyers Over-Committed And Now Vulnerable
- First Time Home Buyers Guide
- First Home Buyers in Danger of ‘Mortgage Stress’
- First Home Buyers Decreasing in Perth
- First Home Buyers’ Buying Trends
- Eligibility for first home buyers grant
- Revival Of Stamp Duty – A Hitch for First Home Buyers
Top Home Loans
| Home Loan | Details | Interest Rate (p.a.) | Comp Rate^ (p.a.) | App Fee / Ongoing Fee | Max LVR | Min & Max Borrowing | |
|---|---|---|---|---|---|---|---|
Loans.com.au - Dream Catcher | A home loan offer with a $0 application fee and one of the lowest available home loan interest rates. | 5.85% | 6.21% | $0 / $375 | 80% | $50,000 / $750,000 |
|
 Bankwest Online Home Loan | A low interest rate home loan with a $0 application fee and ongoing maintenance fees. This offer is exclusively available by applying online. | 5.97% | 5.97% | $0 / $0 | 80% | $100,000 / $1,000,000 |
|
Illawarra Home Loans Bank Beater Home Loan | A low variable rate, beaten down even further by 0.05% p.a. after 5 years. | 6.07% | 6.35% | $0 / $345 | 90% | $250,000 / $1,000,000 |
|
State Custodians Mortgage Company Standard Variable Offset Loan | Awarded the 2011 Non bank Lender of the Year this feature-packed loan rewards customers with a bonus rate drop of 0.25% after 5 years. | 6.02% | 6.23% | $0 / $345 | 95% | $150,000 / $1,000,000 |
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