April 20, 2024

Are you a first-home buyer? Work out the deposit you’ll need upfront to meet the purchase price, other costs you need to bear in mind when buying a home, and ways to get into your home sooner.

Calculating your price range

The first step in getting a house deposit together to buy your new home is to know what price range you should look at. Knowing your price range will mean you can look at a potential home without worrying if it’s within your budget.

Check our Affordability Calculator. It’ll give you a good idea of the range of property purchase prices that might work for your financial situation. You can also use our repayment calculator to see how the interest rate, repayment type, and loan term could affect your repayments.

Larger home loan deposit = less to borrow

Once you’ve found a house that fits your budget, it’s time to determine what deposit you can put down. A larger deposit means you’ll need to borrow less, paying less interest and potentially lowering monthly repayments.

Usually, 20% of the house’s total value is a good amount to aim for as a deposit. You can still get a loan if you have a smaller guarantee, but you may need to take out Lenders Mortgage Insurance (LMI) which adds cost to your loan. It’ll also take longer to pay off.

Most lenders will use a loan-to-value (LVR) calculation to assess the amount they are willing to lend for a home loan. LVR is the amount of your loan compared to the Bank’s valuation of your property, expressed as a percentage.

Once you know the total amount you need to buy the house and the deposit size you’ll need, use our Home Saver Calculator to help you quickly work out how long it may take to save the warranty for your new home.

Other upfront costs to consider

There’s more to buying a home than just the cost of the house itself. There are some other upfront costs you’ll need to know about.

Stamp duty

Stamp Duty is a state and territory government tax that fluctuates depending on location, whether it’s a first home or an investment, and the property’s price. It would help if you considered this when buying a property – our Stamp Duty calculator can help give you an idea of how much this may be.

Legal costs

Several legal steps are involved when buying property. Conveyancing (the sale and transfer of real estate) can include:

  • A property and title search.
  • The review and exchange of the contract of sale.
  • The transfer of the title.
  • Other aspects.

Mortgage establishment and registration fees

These can depend on the state in which you live and who your lender is. Knowing whether these apply to you is also essential. Find out more about the upfront costs of buying a home.

Factors that can affect your loan and interest rate

Now you know your price range, how much you need for your deposit and the other potential upfront costs. In addition, a few factors may affect the amount a lender is willing to loan you and the interest rate they might charge.

Your credit report and score help lenders assess your ability to repay and manage credit, which can affect the size of the loan and the interest rate. A higher credit score can see larger loans at lower speeds, while a lower score might see the opposite.

Having a savings plan to help accumulate your deposit is an excellent way to show you can meet home loan repayments – also, make sure you’re making regular repayments on credit cards or other credit products you have to help increase your credit score.

Support for first-time buyers

The government has a one-off payment that can be made to first-time home buyers, helping them towards their first home. The amount, criteria, and details for a First Home Owner Grant vary from state and territory, so check with your lender or look at the Federal Government’s First Home Owner Grant site for more information.

Having a savings plan to help accumulate your deposit is an excellent way to show you can meet home loan repayments – also, make sure you’re making regular repayments on credit cards or other credit products you have to help increase your credit score.

Knowing your maximum borrowing power

Your borrowing power depends on your situation, lifestyle, income, expenses, credit score, and other factors. If you want to estimate your borrowing power quickly and easily, try using our borrowing power calculator.

To sum up

  • Know what pricey price range of a deposit you can put down.
  • Be aware there are other costs to consider when buying a home.
  • Your circumstances and how your finances are organized can affect how a lender approaches your home loan.
  • If you’re a first-time buyer, government support is available.

 

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