First Home Buyer FAQs
Buying your first home is an exciting milestone, but it can also feel overwhelming. With so much to consider, from saving for a deposit to navigating the settlement process, understanding the basics can make the journey smoother. This guide answers common questions first home buyers have, providing clarity and confidence as you take this important step.
How much deposit do I need to buy a home?
The deposit required typically ranges from 5% to 20% of the property’s purchase price. If you save a 20% deposit, you can avoid paying Lenders Mortgage Insurance (LMI). However, many lenders offer loans with smaller deposits, especially for first home buyers.
To estimate your savings, check out our calculator here: https://www.beckmcleanfinance.com.au/calculator
What is Lenders Mortgage Insurance (LMI), and do I have to pay it?
LMI is insurance that protects the lender if you default on your loan. If your deposit is less than 20% of the property’s value, you will likely need to pay LMI. The cost varies depending on the size of your loan and deposit.
For more information see: https://www.beckmcleanfinance.com.au/resources/understanding-lenders-mortgage-insurance-lmi-and-how-to-avoid-it
What is pre-approval, and how do I get it?
Pre-approval is a conditional approval from a lender indicating how much you can borrow. To get pre-approval, you need to submit financial documents, including proof of income, expenses, and savings. It helps you understand your budget and shows sellers you are a serious buyer.
For more information see: https://www.beckmcleanfinance.com.au/resources/what-is-a-pre-approval-and-why-is-it-important
What are the additional costs of buying a home?
In addition to your deposit, you need to budget for costs such as:
- Stamp duty
- Conveyancing fees
- Building and pest inspections
- Loan application fees
- Moving costs
- Council rates and utilities
For more information see: https://www.beckmcleanfinance.com.au/resources/what-are-the-upfront-costs-of-buying-your-first-home
How do I choose the right mortgage or home loan?
Compare interest rates, loan features, and fees. Look for features like offset accounts, redraw facilities, and the ability to make extra repayments. Consulting a mortgage broker can help you find a loan tailored to your needs.
For more information see: https://www.beckmcleanfinance.com.au/resources/how-to-determine-the-right-type-of-home-loan-for-you
What is an interest rate, and how does it affect my mortgage?
The interest rate is the percentage charged by the lender on your loan balance. It significantly impacts your monthly repayments and the total cost of your loan. Fixed rates offer stability, while variable rates may fluctuate with market conditions.
For more information see: https://www.beckmcleanfinance.com.au/resources/understanding-interest-rates-and-how-they-impact-mortgage-repayments
How long does it take to buy a home?
The process typically takes several months, including:
- Saving for a deposit
- Securing pre-approval
- Searching for a property
- Making an offer
- Finalising your loan and settlement (usually 30-90 days after the offer is accepted).
What is the difference between pre-approval and formal approval?
Pre-approval is a conditional indication of your borrowing capacity. Formal approval occurs after your lender evaluates the property and finalizes the loan, confirming that they will lend you the money.
What is the First Home Owner Grant (FHOG), and do I qualify?
The FHOG is a government initiative to help first home buyers with purchasing or building a new home. Eligibility criteria vary by state or territory, but generally, you must be buying or building a new property as your first home.
For more information see: https://www.beckmcleanfinance.com.au/resources/first-home-buyer-grants-and-schemes-for-australians
How do I know if I can afford the repayments?
Use a mortgage calculator to estimate your monthly repayments based on the loan amount, interest rate, and term. Ensure you can comfortably cover repayments alongside other expenses and consider potential rate rises.
To estimate your mortgage repayments, check out our calculator here: https://www.beckmcleanfinance.com.au/calculator
What is an offset account, and how can it help me save on interest?
An offset account is a savings or transaction account linked to your mortgage. The balance in the offset account reduces your loan balance, lowering the interest you pay.
What is a conveyancer, and do I need one?
A conveyancer handles the legal aspects of property transactions, such as preparing documents, conducting title searches, and ensuring a smooth transfer of ownership. While not mandatory, hiring a conveyancer is highly recommended.
For more information see: https://www.beckmcleanfinance.com.au/resources/what-are-the-upfront-costs-of-buying-your-first-home
How do I make an offer on a property?
You can make an offer directly to the seller’s real estate agent, either verbally or in writing. If your offer is accepted, you may need to pay a deposit to secure the property.
For more information see: https://www.beckmcleanfinance.com.au/resources/how-to-buy-your-first-house-from-a-private-seller
What is a building inspection, and do I need one?
A building inspection assesses the condition of a property, identifying any structural issues or defects. It’s highly recommended to ensure the property is safe and to avoid unexpected repair costs.
For more information see: https://www.beckmcleanfinance.com.au/resources/what-are-the-upfront-costs-of-buying-your-first-home
What is the cooling-off period, and how does it work?
The cooling-off period is a timeframe during which you can withdraw from a property purchase without significant penalties. The duration and conditions vary by state or territory.
How do I know if the property is a good investment?
Consider factors like location, potential for capital growth, rental demand, and the property’s condition. Consulting a property expert or conducting a market analysis can help.
For more information see: https://www.beckmcleanfinance.com.au/resources/how-to-choose-the-right-suburb-to-live-in-as-a-first-home-buyer-in-austra
What is the settlement process?
Settlement is the final step in buying a home. It involves transferring ownership of the property to you and completing all financial transactions. Your lender and conveyancer coordinate this process, which typically takes place on the agreed settlement date.
For more information see: https://www.beckmcleanfinance.com.au/resources/understanding-the-settlement-process-when-buying-a-house
How can I make my home loan repayments more affordable?
Strategies include:
- Choosing a longer loan term
- Making extra repayments when possible
- Refinancing for a lower interest rate
- Utilizing an offset account
For more information see: https://www.beckmcleanfinance.com.au/resources/smart-strategies-to-pay-down-your-home-loan-faster
Can I pay off my mortgage early?
Yes, paying off your mortgage early can save you significant interest. However, check for any fees or penalties for early repayment, especially on fixed-rate loans.
Purchasing your first home involves numerous steps and decisions, but being informed can make the process less daunting. Understanding deposits, pre-approvals, additional costs, and loan options helps you navigate the journey confidently. Don’t hesitate to seek professional advice, whether from a mortgage broker, conveyancer, or property expert. With the right preparation, you’ll be well on your way to achieving your dream of homeownership.
