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getting your foot on the property ladder

by Domain Property Agents, April 23, 2017

Want to buy a home but don’t know where to start? You’re not alone. A new HSBC survey on homeownership suggests that would-be buyers aren’t always realistic when it comes to saving for a property, with many people focused on getting a deposit failing to consider upfront costs and delaying their entry into the property market.  

“The deposit for a home loan is the biggest initial cost of owning a home, but buyers also need to factor in the costs of stamp duty, legal fees, mortgage insurance, building inspection fees and in some cases renovation costs,” said HSBC Australia head of mortgages Alice Del Vecchio.

Given that buying a home is such a big investment, it’s important to make sure you plan for any additional costs. This way when you do go to auction, you won’t miss out on your dream home.

Things you may want to consider when you’re buying your first home include the following:

• A substantial deposit. Most experts recommend a 20% deposit plus extra to cover costs as the ideal amount needed. A higher deposit can also save you money because of the bigger your deposit, the smaller your loan to value ratio (the amount of a loan as a percentage of the asset it was used to buy). An LVR higher than 80% requires lenders mortgage insurance, which comes with its own costs.
• Savings to cover upfront costs such as stamp duty and legal fees. (Stamp duty is calculated by dividing the loan amount by the value of the asset.)
• Pre-approval for a loan. Maybe we should have started with this one. Before you start searching for properties compare lenders by asking for a key fact sheet for each type of loan, once you have decided on a loan and it’s pre-approved you will have a better idea of how much money you can invest.
• Consider an investment. Investment properties outside capital cities or in smaller towns or rural areas can have decent rental yields, making up for much lower capital gains.

Finding the right property for you is also important. After all, if you haven’t budgeted for renovations, you won’t want to buy a fixer-upper. An easy way to narrow your property search is to talk to your real estate agent about the best deals for you.