Leaping into home ownership can be daunting. And while we can’t soothe all your nerves, we can help you plan for a more enjoyable and stress-free home-buying experience.
Get your finances organised
Buying a home can be costly, so get clear on what upfront costs you’re facing.
- Work out your available deposit. Lenders prefer a 20% deposit of a property’s value as it gives you a loan-to-value ratio (LVR) of 80%. If you don’t have a 20% deposit, you will likely be required to pay Lenders Mortgage Insurance (LMI).
- Consider your loan options: whether that’s a fixed or variable rate home loan. As an owner-occupier, you’ll generally get better rates compared to a loan for an investment property.
- Apply for pre-approval with your lender.
Discover how much you can borrow
Your income, expenses and credit report are three primary considerations for any lender, so having a solid employment and savings history with a high credit score is important.
While a lender may be prepared to loan you a considerable amount, ask yourself “how much money am I happy to spend on mortgage repayments each month?”. You know your financial situation best, and interest rates can rise, so you want to ensure you have some buffer in your budget.
Here are some helpful tools:
- Deposit and upfront cost calculator – Calculate how much you will need for a deposit and the initial upfront fees when buying a home.
- Borrowing power calculator – Calculate how much you can borrow for a home purchase, based on your expenses, income, debts and assets.
- Government grants and concessions - if you’re a first-time homeowner you may be eligible for government support, such as the first home owner grant (FHOG)
Expected home buying costs in Australia
- Stamp duty and Land Tax. Depending on your state and territory, this can be a significant cost into the tens of thousands.
- Government fees. To register your mortgage and transfer ownership of the home and land, you may be charged additional fees.
- Conveyancer/solicitor. Costing about $1500, conveyancers help you check your contracts and ensure the sale is legal. Conveyancing fees apply and are paid at settlement.
- Building and pest inspections. Costing about $500, inspection reports reveal hidden defects and damage in a property.
- Bank fees/loan set-up costs. Costing around $2000, this covers loan establishment, valuation and settlement fees.
- Building, home & contents insurance. Once you’re in, you want to be protected.
- Other costs. Think removalists, paying rent during a move-in period or breaking your lease.
Read the guide to upfront costs of buying a home to learn more.
The home-buying process
Finding your dream home can take time, so expect a rollercoaster of emotions along the way.
If you're a first home buyer, our guide to buying your first home might be helpful.
Get to know the housing market
With your pre-approval arranged and your price range clear, you're ready to get to know the property market. Consider these house-hunting tips:
- Review properties recently sold in your target area, and filter for your price range. Check out their initial asking price, as the guide is often lower than the final sale price. This will give you a realistic idea of the type of property you’re able to buy for your budget.
- Consider what your dream home looks like: is it a fixer-upper, a new home, a townhouse, an apartment or a terrace? Set alerts that match your criteria and type of home online.
- Meet local real estate agents, and asked to be added to the email lists for new properties. Ask them for intel on the local suburb, including council rates and their standard sales process.
- Importantly, do not disclose your budget or your pre-approval limit! This may be used against you in a negotiation and will be recorded on their system.
A buyer's agent acts solely on behalf of their client (the buyer) during a home-buying transaction. They offer valuable guidance on house hunting, off-market properties, and house prices and ensure that everything runs smoothly when negotiating with real estate agents or closing on properties. For first-home buyers, buyer’s agents save them months of work and anguish.
Summary of the sale process.
- Private treaty. If your offer is accepted in a private sale, you pay a vendor’s deposit (normally 10%) when you exchange signed contracts with the seller. You may get a ‘cooling-off period’ depending on your state, territory or contract. From here, the sale of the property is legally binding, but you aren’t the owner until settlement day.
- Auction. If you make a winning bid at auction, you’ll sign and exchange the contract and pay your deposit (normally 10%) right there on the spot. From here, the sale of the property is legally binding, but you aren’t the owner until settlement day.
- Off the plan. If you sign a contract and pay a deposit on a property that’s yet to be built, the balance is payable at settlement – usually when construction’s completed – which can be several years later.
Inspecting open houses
Many homes in Australia sell after the first or second inspection. While it’s important to ‘get a feel’ for a place, taking a structured approach to open homes will help you move quickly if the home is in excellent condition and ticks the boxes for you.
- Contracts. Ask for the contract of sale and send it to your conveyancer. A conveyancer can review your contract documents and recommend amendments that will help you– highly recommended for first-home buyers.
- Check in with your lender or mortgage broker. Run the address past your lender to ensure they’ll lend on this property.
- Off the plan. Research the developer and builder and check with your state government: ACT, NSW, NT, QLD, SA, TAS, VIC, WA
- Strata report. Check for good management, planned major repairs, ongoing disputes, and by-laws like no pets or reno restrictions. Your solicitor/conveyancer can organise and check the report.
- Check with the local Council. Look for proposed major developments, zoning changes and if the property has an elevated insurance risk of flood or bushfire – generally found on the local Council website.
- Pest and building inspection. This report helps to uncover hidden damage, such as termites and structural damage. Hiring an independent professional inspector costs around $500 but it can save you significant costs in future.
Bidding at Auction
- Remember, all bids during an auction are unconditional. Know your pre-approval limit, have a good idea of the asking price and a fair valuation, and don’t let the emotions of an auction, or an enthusiastic real estate agent, tempt you above it.
- You can register as a bidder on the day with ID, or beforehand. If you haven’t already, register as a bidder as you arrive.
- If you win the auction - congratulations! You’ll immediately enter into a binding contract, with no cooling-off period. You will sign the contract and pay the vendor’s 10% deposit there and then.
Making an offer via private treaty sale
Private treaty sales are usually in the form of a written offer, including the purchase price, and accompanying signed contracts. It is up to the buyer whether there is a cooling-off period or not. If you’ve entered a cooling-off period, you’ll have several days to change your mind, but you’ll forfeit some of your deposit (about 0.25% of the purchase price, which would be $250 for every $100,000). Check the details with your local government ( ACT, NSW, NT, QLD, SA, TAS, VIC, WA).
Finalising your home loan
Once you’ve made an offer and it’s been accepted, you’ll begin working towards settlement day and eventually, getting the keys!