It’s going to be the most significant purchase of your life that will either have you sitting pretty on the property ladder or send your finances down the drain. Learn how to avoid some of the property pitfalls.

Don’t make mistakes that can impact your ability to buy, apply for a loan or end up costing you more in the long run.

Good news for first home buyers is the crazy panic of 2016 and 2017 has eased.

New housing loans brought prices down for the first time in years in 2018.

First home buyers accounted for 29% of owner-occupier loans issued in May 2019, which is the highest number of new mortgages since 2012 and it is still on the rise.

It’s now easier to get a loan, stamp duty exemptions, State and Territory duty exemptions and grants offering a helping hand in the shape of the First Home Loan Deposit Scheme (which will assist up to 10,000 Australians get into their first home with as little as 5 per cent deposit) from January 1, 2020.

However, make sure you do your homework before househunting and aviod these rookie real estate mistakes.

1. Not being budget savvy

Don’t start looking online before you know how much you have to play with.

Get a clear idea of your budget before you go house hunting. Aviod getting hung up on a dream home beyond your means.

How to avoid: Use an online home loan borrowing calculator, or speak with a lender or mortgage broker to understand what the banks will be willing to lend you.

2. Not having that 20 per cent deposit

You can get into your first home without the standard 20%, but you will need to take out Lenders Mortgage Insurance (aka LMI). An insurance policy protecting the lender (not the buyer) from financial loss in the event you can’t make your home loan repayments.

How to avoid: For buyers unable to save the 20% deposit, who want to avoid paying for LMI, could tap into the First Home Loan Deposit Scheme if they make the cut. Or have a parent go guarantor for the loan to provide the additional security.

3. Not getting the reality of rates

Understanding interest rates is power in the mortgage world. Rates may be at historic lows, but what goes down must go up eventually. A first-time buyer purchasing today will likely be in a home loan for up to 30 years so it’s worth pointing out that interest rates were more than double their current status just 10 years ago.

How to avoid: Prospective buyers should read up on what’s influencing interest rates, so they’re not blindsided when rates increase. Make sure you constantly compare home loans to determine if there are better offers available.

4. Not having enough left over

It’s not just about the purchase price. Beyond buying, you need to consider the hefty costs of stamp duty, building inspection or strata reports, transfer fees, solicitor fees, moving costs, new furniture or even renovations.

How to avoid: Research additional costs before buying so you have money left over to cover any unexpected expenses or repairs. Set a buying budget so you can tally up all the possible associated costs.

5. Not getting reports

Too many first-home buyers try to cut corners when it comes to building and pest inspections or strata reports. Not doing a building and pest inspection will save a few hundred dollars, but that’s one of the biggest mistakes first-home buyers make.

Building and pest inspections or looking into the strata report of an apartment building are vital steps. If you aren’t aware of a home’s problems you could be out of pocket by tens of thousands of dollars.

How to avoid: Get an independent building and pest inspection done on each house you are considering or order a strata report to get insight on the financials of an apartment block you’re looking at.

6. Missing out on grants

Markets change and so does the assistance offered from Federal, State and Territory governments. The First Home Owners Grant differs in each corner of the country, but in most cases the grant is only for first-timers buying or building a new house or unit. In some places it can be used for established homes. Just how much you can get depends on a number of circumstances.

How to avoid: To understand which grants they may be entitled, and how much, first-home buyers should visit First Home website.

7. Falling for the frills

First-home buyers just need to remember not to get too emotionally attached to a property because of the furniture or styling. The home has probably been staged. Real estate agents want to sell you the dream but it’s not going to look like that once you move into it.

He added that the same idea goes for house and land packages or off-the-plan apartments. Don’t get wowed by the new designs and inclusions builders are showing. It could cost $100,000 to $200,000 more to get the same home than the basic advertised price.

How to avoid: Read the fine print and ask lots of questions of the builder or developer. Get it down in black and white what you’re actually signing up to buy.

8. Not negotiating

Not everyone is a born negotiator, but there’s no time like the present to learn some barter banter.

The power of negotiation doesn’t only apply to the purchase price but to haggling for a home loan. First-time buyers shouldn’t take the first mortgage on offer. You don’t know if you don’t ask.

How to avoid: Take a proactive approach and research what is available in the market and be prepared to negotiate on the interest rate to avoid paying too much.

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  1. Nathaniel Romulo

    January 16, 2020 at 11:00 am

    Hi! If you have a property in NZ, are you qualified to avail the first home buyer grant in OZ?


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