Whether its to make your first big steps on your own, prepare for an expanding family or just to get out of the rental market, buying your first home is a daunting prospect, and one that needs a lot of forethought to avoid potential pitfalls. Here’s a quick rundown on what to be aware of, before you start your house hunting in earnest.
First of all, there is a little good news (for the intrepid buyer), and that’s that we haven’t seen the wild price growth over the past 12 months that characterised much of 2020 and 2021. First home buyers with tight budgets were particularly hard hit by prices that frequently blew past advertised ranges as everyone was house hunting seemingly at the same time. So its at least a little easier to figure out what figure to put forward with your offer.
On the down side, 3% of interest rate rises have wreaked havoc on budgets and lenders are once again putting a magnifying glass to potential borrowers so you will likely end up with a tighter spending limit than might have been the case a year ago. With the potential for further rate rises in the first half of this year, pre-approvals are constantly changing so stay on top of your capacity with your broker or bank. If you are looking to improve your position, then a tight belt and an allergy to Afterpay and other BNPL (buy now, pay later) products will be in your favour, but count on 3 months of better habits as a minimum for this to change your outlook.
Big government handouts like Homebuilder are likely to remain a thing of the past, but there are a number of government schemes designed to get you into a home sooner, with a lower deposit requirement (as little as 5% or even 2% in some cases) without having to pay Lender’s Mortgage Insurance (LMI). Its not cash in your pocket but it is a potential saving of thousands of dollars. The new for 2022 Help to Buy shared equity scheme can also see those on lower incomes buy property with the government tipping in and owning a share. Again, this is an option to get upfront and repayment costs lower but it does mean paying out the government their share when you are ready to move on.
Finally, the $15,000 first home buyer’s grant remains in place for brand new homes but with rising land and build costs this can rule out those without a larger budget. Stamp duty concessions however apply for both new and existing property, again saving you money rather than offering that free cash feeling.