Buying A Home

As with any loan, you need to be able to prove to the bank that you’re capable of paying it back. The thing about a mortgage is that it’s a real proper serious loan, the realest of all the loans. To be approved for a mortgage you pretty much have to get yourself in some other debts first, pay them back, thus showing the bank that you’re responsible enough to handle yo’ finances.

If you’ve got any outstanding debts, it’s a good idea to consolidate them and square them up. If you don’t have any debts, and never have, it’s worth thinking about getting a credit card, car loans or a personal loan (and being responsible enough to sort it). This might sound a bit crazy, but this is how you build a good credit rating, which will basically be the make or break for getting your mortgage approved.

Once you’ve got your debts in order and your credit rating looks good, the next step is to start saving for a deposit on said house. The minimum deposit is 5 per cent of the total value. This means that if you want to buy a $500,000 place, you’ll need to have at least $25,000 to throw down straight away. And realistically, it’s much easier to get your mortgage approved if you can get 20 per cent of the deposit together ($100,000). The bigger the deposit, the less interest you pay in the long run. So the sooner you start saving, the better.

Getting pre-approved for a mortgage will give you a better idea of what you can afford. To get pre-approved, you submit an application to the bank outlining your income, credit rating and how much you’ve saved for a deposit. Then the bank will tell you how much they’re willing to lend you. This way you can shop around for a place based on how much the bank has pre-approved for you.

This is key because most people start looking at really nice houses, then realise that they can’t actually afford the loan on them. Pre-approval helps bring you back down to earth, and might inspire you to keep saving up for a bigger deposit.

Stamp Duty: this is a tax imposed by state governments when you buy a home. The rate of stamp duty varies from state to state.

Lender's Mortgage Insurance: if your deposit is less than 20 per cent of the total value of the house, you have to pay lender’s mortgage insurance, which basically protects the lender if you default on your loan. It’s usually a one off payment at the beginning of the loan, and in some cases can be put onto your mortgage.

Conveyancing and Legal Costs: conveyancing is the process of preparing documents to transfer ownership of a property. The process requires a bunch of paperwork and lawyers and can cost a bit.

Title Search and Regsitration Fees: again, these vary from state to state but are only likely to cost between $100 and $200.

Pest and Building Inspections: you’ll probably need to get someone to come and inspect the place to make sure the building is solid and there aren’t any pests such as termites or white ants. This usually costs around $500.

Home and Contents Insurance: This is often compulsory under the terms of your mortgage, but it depends which bank you borrow from.

This information is intended to be general in nature only and might not apply to your personal circumstances. When in doubt always seek professional guidance.