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Common First Home Buyer Questions

Jun 26, 2018 | Financing

How much can I borrow?

Know your limits: the amount you can borrow depends on what you are buying and how much money you have left when you account for all your fixed commitments from your net income. As a general rule of thumb, you should be paying less than one third of your income on your mortgage repayments. Knowing how much you can borrow gives you the confidence to make a calculated offer on your property of choice.

How much deposit do I need?

Most lenders require 10% deposit and a history of savings. If you are borrowing more than 80% of the purchase price you will most likely be required to pay Mortgage Insurance (which means an additional fee). The more you can put down as a deposit, the less you will have to borrow, the lower your repayments and the less you will have to pay over the lifetime of your loan.

What does LVR mean?

LVR stands for loan-to-value ratio. Essentially, it’s the percentage of money you borrow for a loan, compared to the value of the property. Lenders generally like to keep the LVR within 80% – so you would need a 20% deposit. If you don’t have a 20% deposit, you will be subject to lenders’ mortgage insurance which protects the lender if you default on the loan. This can be expensive.

What is Lender’s Mortgage Insurance and do I need it?

Lender’s Mortgage Insurance (LMI) is usually required where your deposit is less than 20% of the purchase price of your property and protects the lender in the event that you default on your repayments. LMI is a once only fee that is paid at the time of loan settlement. It can often be added to the loan.

Do I have to pay stamp duty?

When you buy a home in Australia, the government imposes a stamp duty tax. This tax is added to the purchase price of your home and is assessed on the sale price of the property. Stamp duty and concessions vary from state to state. First home buyers may be eligible for rebates in the form of stamp duty rebates or exemptions. Your conveyancer/legal representative will advise you of the amount payable or you can check your state’s website.

More information: 
Transfer duty (Stamp duty) — NSW Government Revenue

What other costs should I allow for?

Depending on the property, there can be a variety of additional costs to consider that aren’t limited to stamp duty, loan application fees, legal and conveyancing services, loan establishment fees, building inspections, property valuations, lenders mortgage insurance, home and contents insurance, moving costs – the list goes on. The costs will depend on your individual situation.

As a first home buyer, am I eligible for any grants?

First home buyers are entitled to the First Home Grant, however, the amount payable and eligibility criteria varies by state. The NSW First Home Buyers Grant (New Homes) was developed to assist eligible first home owners to purchase or build a new home by offering a $10,000 grant. The Guidelines for the Grant in NSW:

  • Must be a brand new home
  • You can either purchase a new home worth up to $600,000 or build one yourself worth up to $750,000
  • You must not have received the first home owners grant in any other State or Territory
  • Applications must be lodged within 12 months of completion of settlement

More information:
The latest details on the NSW First Home Owner Grant

Disclaimer: This article provides general information and has been prepared without taking into account your objectives, financial situation or needs. We recommend that you consider whether it is appropriate for your circumstances. Your full financial situation will need to be reviewed prior to acceptance of any offer or loan product. It does not constitute legal, tax or financial advice and you should always seek professional advice in relation to your individual circumstances. All loan applications are subject to lenders’ terms and conditions, and eligibility criteria. Lender fees and charges will apply.

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