When doing anything for the first time, mistakes are bound to occur, and buying your first property is no exception. Here are the 10 of the most common pitfalls you will want to avoid as a first-time home buyers.
The price of a property is just one part of the total expenses involved in purchasing a home. There are several additional costs that can add up, including Stamp Duty (or Transfer Duty), Lenders Mortgage Insurance (if applicable), legal fees for a conveyancer or solicitor and costs associated with building and pest inspections.
Before you begin your property search, it’s crucial to have a comprehensive understanding of these 'hidden' costs and incorporate them into your budget. Additionally, consider setting aside a buffer for any unexpected expenses that may arise during the process.
Conditional pre-approval is a signal from a lender that indicates your eligibility to apply for a home loan within a specified limit. While it doesn't bind you to accept the loan, nor does it guarantee that the lender will provide that amount, it demonstrates to sellers that you're a serious buyer and that you have the financial backing to afford the property.
As a first-time home buyer early on in the home buying journey, getting conditional pre-approval can also help you focus your property search by providing you with a better understanding of what you’re likely to be able to afford based off what a lender is prepared to loan you based off your credit score, income and other measure. Should your circumstances shift during your search, such as changes in your financial situation, you have the option to renew your conditional pre-approval and either increase or decrease your borrowing capacity.
Source: Commbank
Failing to utilise government schemes or grants can be a costly mistake for first-time home buyers, because these initiatives can drastically reduce the financial burden of purchasing a property.
The First Home Owner Grant (FHOG) provides a one-time payment that can be used to offset costs, and to not research or applying for this grant could mean missing out on thousands of dollars. Similarly, The First Home Loan Deposit Scheme (FHLDS) allows eligible buyers to purchase a property with as little as a 5% deposit, bypassing the need for costly Lenders Mortgage Insurance. There are also Stamp Duty concessions and/or exemptions offered by most states and territories that can significantly lower upfront costs, depending on the property's value and location. Lastly, the First Home Super Saver Scheme (FHSSS) enables buyers to access voluntary superannuation contributions to boost their deposit savings, often with tax advantages. Ignoring these programs could leave you as first-time buyer spending far more than is necessary, as well as delay your homeownership goals.
Failing to enlist a conveyancer early in the home-buying process is a common mistake that can lead to complications when purchasing a property. A conveyancer plays a crucial role in ensuring the legal transfer of property ownership runs smoothly, handling essential tasks like title searches, contract reviews, and settlement coordination. Without a conveyancer involved from the beginning, buyers risk overlooking critical details in the contract of sale, such as special conditions, zoning restrictions, or hidden liabilities that could impact the purchase and hinder you from from making an informed decision.
Furthermore, delays in appointing a conveyancer might result in missed deadlines, putting the transaction at risk of falling through and/or incurring penalties. Conveyancers also assist in explaining the legal jargon and complex processes, helping buyers understand their obligations and avoid costly mistakes. Starting the conveyancing process before you sign a contract ensures that any potential issues are identified and resolved before they become major hurdles, saving you both time and money while providing peace of mind.
Source: Real Estate
Skipping a building and/or pest inspection is a critical mistake that many first-home buyers regret. These inspections are essential for identifying hidden issues that may not be visible during a standard property viewing.
A building inspection can uncover structural defects, such as foundation issues, cracks or water damage, that could lead to costly repairs down the line. Similarly, a pest inspection is crucial for detecting infestations, particularly termites, which are a common problem in many parts of Australia and can cause extensive, expensive damage if left untreated.
Without these inspections, buyers risk purchasing a property that may appear perfect on the surface, but hide significant problems. Moreover, having a detailed inspection report can provide leverage for renegotiating the purchase price or requesting repairs before settlement. Investing in inspections upfront can save buyers thousands of dollars and avoid unnecessary stress. For first-home buyers, this step is a vital safeguard against unexpected surprises in your new property.
When it comes to buying a home, researching and comparing mortgage options from different lenders is a must. A home loan is a long-term financial commitment, and selecting the wrong option can lead to higher interest rates, unfavourable terms and unnecessary fees. Different lenders offer varying interest rates, loan features and repayment options, so sticking with the first offer or defaulting to a familiar lender could mean missing out on better deals.
For instance, some lenders might provide competitive rates for first-home buyers, waive fees or offer flexible repayment terms that better suit your financial situation. Additionally, exploring options like fixed, variable, or split-rate loans can help you align your mortgage with your budget and risk tolerance. Many lenders also provide incentives, such as cashback offers or lower rates for green homes, which can save you thousands over the life of the loan. Thorough research and comparison empower you to negotiate better terms and secure a mortgage that aligns with your financial goals, ensuring a smoother and more affordable journey to homeownership.
Source: Money Smart
Relative to the above, if you're struggling to ascertain which loan option is right for you, then it would be remiss to not employ the services of a mortgage broker. Mortgage brokers provide and act as intermediaries between borrowers and lenders, offering expert advice and access to a wide range of loan products. Without their assistance and professional advice, first-time buyers often face the overwhelming task of navigating complex loan terms, varying interest rates, and hidden fees on their own. Brokers have industry knowledge and established relationships with multiple lenders, including smaller or non-traditional ones that might not be accessible directly. This allows them to present competitive options that suit a buyer's financial situation, potentially saving thousands in interest and fees over the loan term.
Additionally, brokers streamline the application process, managing paperwork and ensuring compliance with lender requirements. For first-home buyers unfamiliar with the intricacies of securing a mortgage, bypassing a broker could mean missing out on valuable insights, time-saving support, and substantial cost savings.
Source: Money Smart
Not researching the area you're planning to buying could be cause for headache down the line when purchasing a property, leading to disappointment, inconvenience or financial loss down the line. The location of a property significantly impacts its value, liveability and future resale potential. Without proper research, buyers might unknowingly purchase in an area with high crime rates, inadequate infrastructure, or limited access to essential services like schools, healthcare, and public transport.
Factors such as traffic congestion, noise levels, and proximity to undesirable facilities like industrial zones or waste management sites can also affect day-to-day living. Additionally, buyers may miss out on growth opportunities by overlooking areas with potential for development or increased property values. Local zoning laws and planned developments, such as new roads or commercial projects can significantly impact the neighbourhood's appeal over time. Thoroughly investigating the area, including visiting at different times of day and speaking with locals, ensures that you'll choose a location that aligns with your lifestyle, needs, and long-term financial goals.
Source: NRP Law
An important part of house hunting is completing property inspections, and failure to do so prior to purchasing a home can lead to significant financial and emotional stress for first-home buyers. A property may appear perfect in online listings or during initial viewings, but without a thorough inspection, buyers risk overlooking serious issues. Inspections provide an opportunity to identify potential problems, such as structural damage, water leaks, mould or electrical faults which could incur costly repairs.
Furthermore, inspections help ensure the property matches the description in the listing and the terms outlined in the contract of sale. By skipping this step, buyers may unknowingly inherit hidden defects or non-compliant renovations that could impact safety or future resale value. For apartments or strata properties, inspections can also highlight concerns in common areas or shared facilities. An inspection not only gives buyers peace of mind but can also serve as leverage for renegotiating the price or requesting repairs before settlement. Skipping this essential step may turn a dream home into a financial burden.
Source: NRP Law
When purchasing a property, factoring in ongoing costs, such as body corporate fees and insurance, is a must to avoid budgets strain and financial stress after purchase. While many buyers focus on upfront expenses like the property price, deposits, stamp duty and conveyancing fees, they often underestimate or overlook recurring, hidden costs associated with homeownership. For example, body corporate fees (applicable to strata-titled properties like apartments or townhouses), cover shared expenses such as building maintenance, landscaping and amenities can all vary widely depending on the property. Similarly, home and contents insurance is essential for protecting your investment from unforeseen events like fire, theft, or natural disasters, and its cost depends on factors like location and property value.
Additional ongoing costs may include; council rates, utility bills, maintenance expenses, other property taxes and, for those on a variable interest rate, a rise in interest rates. Failing to account for these in a realistic budget can leave buyers struggling to meet monthly payment obligations, diminishing the enjoyment of their new home. Properly budgeting for these recurring expenses ensures financial stability and long-term peace of mind.
Source: Real Estate