Enquiry
0433 912 319

First Home Buyers

  1. Home
  2. First Home Buyers

At Structured Finance Group, we understand that buying your first home is exciting, but it can also be challenging at the same time. Hence, we have prepared a step-by-step guide to help you in this process.

When you are looking to buy your first home, the very first thing is to do your research.

Start familiarising yourself with the process, your options available, costs involved and most importantly is to find out your borrowing capacity and how much you can afford to avoid any surprises and disappointment.

  • The first key question: How much can you afford?
    Your broker can give you an estimated figure based on your income and your living expenses. For a more accurate figure, please state your living expenses as closely as you can to your actual spending. This will give you a clearer picture of your financial circumstance and help to ensure that you can make your loan repayments without having a financial hardship. It is also essential for you to discuss with your broker any foreseeable changes in near future that you know could affect you financially such as a change in income, anticipated large expenditure, or expecting a newborn.
  • How much deposit would you need?
    Most lenders will need to see at least 5% savings of the property value plus funds to cover all relevant costs. The conventional lending is 80% of the property value. Lenders Mortgage Insurance (LMI) is payable when you borrow more than 80%. It is a one-off premium which you can choose to pay the lump sum upfront or include it within your loan. LMI protects the lenders and not the borrowers. After a few years, if you intend to refinance to another bank, LMI may be payable again if the loan still exceeds 80% of the property value.
We understand that saving a large deposit may not be an easy task. Below are some options that could help avoid having to pay LMI.
  • Family support
    If your family members have equity in their property, they can provide you assistance by being your guarantor. Family members that can offer a family guarantee are your parents (including step-parents and in-laws), spouse, de-facto partner, grandparents, siblings, children, brother in law or sister in law, and legally appointed guardians. It is important to find out if they have sufficient equity in their property and if they are willing to provide a guarantee using that property. The guarantee is only for a portion of your loan amount (up to 20% of the property value) and not for the whole loan amount. This option reduces your overall loan to value ratio (your new loan + guarantee loan + guarantors existing loan / your property value + guarantors property value) and thus will help you avoid having to pay for LMI. This can help you save a significant amount of money as well as getting you into your new home faster.
  • Keystart
    There are also other options available that require an even smaller deposit. Keystart is a government-backed loan scheme where the required deposit could be as low as 2%; however, there are restrictions on eligibility.
  • First Home Super Saver Scheme
    As the name suggests, this is for First Home Buyer only where the scheme allows you to save money for your first home inside your superannuation fund. It’s a voluntary contribution into your superfund that might have concessional tax benefits.
  • First Home Owner Grant (FHOG)
    Eligible first home buyers may be able to receive a grant towards the purchase of a new home. Stamp duty exemption or a duty concession may also be available for eligible first home buyers if they purchase a new or established home or vacant land. We will assist and guide you with the application.
  • First Home Loan Deposit Scheme
    The Coalition has announced the First Home Loan Deposit Scheme in May 2019. The Scheme will commence on 1 January 2020 and will be operated by National Housing Finance and Investment Corporation (NHFIC). The Scheme will help eligible first home buyers to purchase their house with a deposit as low as 5% without having to pay for Lender’s Mortgage Insurance. The Scheme is still waiting for official media release from NHFIC and further details are to be confirmed.
  • Lender fees
    Generally, lenders charge fees in two main formats, which are an establishment fee and annual package fees. Establishment fee is payable once off. Products with annual package fees usually offer a credit card, offset facility, better-discounted rates, higher flexibility to structure and split your loan, and ability to include multiple home loans. There may be other fees such as upfront lender settlement fees, ongoing monthly fees, rate-lock fees.
  • Lender’s Mortgage Insurance (LMI)
    LMI is incurred when your loan is more than 80% of the property value. If you default on your mortgage, the insurance will only cover the lender. The amount of LMI payable depends on the property value and percentage of your lending. The higher the percentage, the more expensive LMI will be. You may be eligible to borrow up to 90% and have LMI waived if you qualify for lender’s professional package.
  • Government fees
    Stamp duty is a government tax payable when you transfer the ownership of the property. The amount of stamp duty payable is based on the market value of the property. Generally, the more expensive the property is, the higher the stamp duty will be. If you are an eligible First Home Buyer, you may be exempted from paying stamp duty or benefit from a concession rate.

    Associated government registration costs include transfer registration, mortgage registration, and title searches. The amount of fee varies depending on the complexity of the transaction.

    You might be required to pay for shire water and council rates depending on the billing cycle. As the vendor prepays rates, your settlement agent will adjust accordingly and calculate your portion payable.
  • Professional fees
    Conveyancing: Legal professionals may charge you a fee ranging $600 to $2,500 to prepare the paperwork necessary to transfer the property ownership and register your mortgage with Land Gate on your behalf. Feel free to obtain a quote from our solicitor and settlement agent.

    Building and pest inspection: You can hire a professional to complete building inspection and pest inspection and make sure that your property is structurally sound and pest free. The fee ranges from $500-$800.

    Home insurance: It is mandatory to purchase a home building insurance and provide the lender with a copy of your insurance policy (aka. Certificate of Currency) before settlement. This is to ensure that your mortgaged property is covered in the event of a fire, flood, and third-party damages. Your broker will inform you the minimum amount required to be insured.
By engaging us to be your broker, you will have access to over 40 lenders on our panel and hundreds of products. Based on your personal and financial circumstance and preferences, we will do the research and legwork and advise you the most suitable loan structure and outcome.

A few items to consider when choosing your lender and product:

  • Do you fit within the lender’s policy?
    Before we recommend a lender and product and talk about interest rates and loan features, we will collect all your information and run a preliminary assessment. This includes finding out your eligibility with different lenders. As each applicant and household may have different finance circumstance, it is essential for us to check which lender’s policy can cater for your lending needs. This requires brokers to be kept up to date and familiar with each lender’s policy and lending appetite.
  • Interest rate
    Interest rate is usually the very first thing that most borrowers look at. To put things in perspective, the loan product with the cheapest rate may not necessarily mean it’s the best or most suitable for you. You will need to consider other features you need or prefer, such as free redraw facility, offset facility, ability to split loan, and access to branch.
  • Principal and interest or interest-only repayment?
    Interest-only repayment allows you to make a smaller loan repayment. It is ideal for positive cash flow in the short term; however, the consequence is that you may end up paying more interests in the end and the loan repayment may be higher once the interest-only period ends.
  • Choosing a fixed or variable rate?
    Understanding the differences between fixed and variable rate is important as each option has its pros and cons.
  • Product features

    • Packaged loan:
      Packages often offer higher interest rate discounts, purchase cashback promotions and refinance rebates, the inclusion of one credit card, offset facility or ability to have multiple offset accounts linked to one loan account, ability to include numerous home loans in one package, flexibility to split loan and switch product at no extra fees and charges. It is recommended for clients that are looking to have the majority of their banking needs met in one package product and as well as clients that are looking to build their property portfolio.

    • Offset:
      An offset account is your daily transaction account with an offset facility. Breaking it down, it is your typical daily transaction savings account; however, when linked to your loan account, every dollar in your savings account will help you save interest! For example, your loan balance is $300,000, and you have $50,000 in your savings account, you will only be paying interest on the $250,000. Please keep in mind that interest is calculated daily by the lender and offset does not help you reduce your loan balance. Offset allows you to have instant access to your savings and at the same time helps you save interest. Offset facility usually attracts ongoing monthly or annual fees.

    • Redraw:
      In contrast to having an offset facility, another option is to make extra repayments in addition to your ongoing and regular loan repayments. By making additional repayments, you are reducing the loan balance (or principal). Redraw function allows you to withdraw your extra repayments when you need cash.

    • Line of credit:
      It is a revolving credit facility on interest-only repayment. It is suitable when you require a large sum of cash relatively quickly, and perhaps you want to use it as your deposit for an investment property.

    • Access:
      Do you need access to a branch or are you cool with just having internet banking?

After finding out your borrowing capacity, understanding how much deposit and funds you need, and confirming your loan structure and product, the next step will be applying for a pre-approval.

Pre-approval is a loan conditionally approved pending security (the property to be purchased).

We will need to do a full financial assessment to issue you with a pre-approval, which require us to assess your income, expenses, assets and liabilities to make sure that you can afford the new proposed loan. Once you have satisfied all the lender’s criteria and requirement, they will conditionally approve your loan.

Note: please ensure you have disclosed complete and accurate information, as missing information or incorrect information provided could lead to delay in processing time or even a decline of your loan application.

Once you have been pre-approved, we will provide you with the pre-approval letter from the lender. It is generally valid for 90 days without new financial information required, provided that your financial situation has not changed.

  • Ensure that your pre-approval is still valid and has not expired.
  • Research the property – we can provide you with a property report showing you comparable sales, previously sold price, and zoning.
  • Appoint your legal representative (settlement agent/solicitor). Contract of sale should be reviewed by a solicitor or conveyancer, including cooling off period, clauses, caveats and conditions if applicable.
  • Organise building and pest inspection to ensure that the property is both structurally and internally sound.

Once you have obtained formal approval (aka. unconditional approval), your broker will notify you and prepare your loan contract and mortgage documents for you to sign and return to the lender. Your broker will then inform you outstanding items required by the lender before booking settlement and liaise with your settlement agent and the lender to ensure a smooth settlement process. It is also imperative to obtain approval for your First Home Owner Grant (including for stamp duties exemption and concession rate) before finalising funds required for settlement.

Utilities
It is also the time to inform your utility companies about your purchase and the estimated settlement date so that you will have your utilities all in place when you move in.

Final inspection
Prior to settlement, you will have the opportunity to complete a final inspection on the property. The Western Australian Department of Commerce website has a property checklist template to help you. At this time, you should make sure that all the property’s conditions are satisfied. If any issues are found at this stage with the property, make sure that they have been rectified or contact the vendor’s real estate agent and work towards a solution to fix them.

Congratulations! Your loan has settled and the property is now yours! A few reminders post-settlement are for you to update your new residential address with the Department of Transport, your workplace, and other places so that your bills and letters will be sent to the correct address, and don’t forget to update your new bank account details for all your direct debit and salary credit. We will be in touch from time to time to ensure that your home loan is competitive in the market.

Disclaimer statement: Your full financial situation would need to be reviewed prior to acceptance of any offer or product. 

Switch The Language

    Etiam magna arcu, ullamcorper ut pulvinar et, ornare sit amet ligula. Aliquam vitae bibendum lorem. Cras id dui lectus. Pellentesque nec felis tristique urna lacinia sollicitudin ac ac ex. Maecenas mattis faucibus condimentum. Curabitur imperdiet felis at est posuere bibendum. Sed quis nulla tellus.

    ADDRESS

    63739 street lorem ipsum City, Country

    PHONE

    +12 (0) 345 678 9

    EMAIL

    info@company.com

    PURCHASE