6 Essential Things Every First Home Buyer Needs To Know
Although buying your first home is an important milestone for all young people, it is undoubtedly a major financial decision that also holds a lot of often unexpected costs and paperwork.
The best that you can hope to do is equip yourself with the most essential information so that you can build a foundation of knowledge that can support you throughout the process of buying your first home. You can find these helpful essentials outlined below.
1. Navigating depreciation and future tax returns
First and foremost, it’s imperative that you create a detailed depreciation schedule for your new home, as it’s a major fixed asset that will be added to your next tax return, as well as all your tax returns for the foreseeable future. Consult with your accountant to ensure that your home’s depreciation schedule is clearly defined and outlined so that you’re equipped with a solid timeline of your home’s depreciation.
This is doubly important if you’re considering buying a secondary property or investment property in the future, as you can fund this investment using the capital allowance deductions from your first property. Naturally, it’s best to know exactly how much you can invest and when. In essence, a detailed depreciation schedule can support you in your development of a long-term investment schedule.
2. Understanding first home owner grants
Whilst taxation should be considered to be of the utmost importance, chances are that your first foray into real estate will involve reading up on the federal government’s first home owner grants. It’s important to note that these grants are changeable depending on which state you reside in, as well as the nature of your property. You may receive a larger grant for building in a new or developing suburb, as state governments seek to provide first home buyers with added incentives to invest in new neighborhoods.
First home buyers are also eligible for concessions or exemptions surrounding stamp duty, this again is dependent on other factors, like the value of your new property.
3. To build or not to build
It’s worth noting that not all first homeowners want to build a brand new property. For some families, buying an established property is simply more feasible, whether that be because they’re looking to purchase in an area with little new development, or that they’re simply looking to move in promptly. On occasion, first home buyers can stumble across an established house that happens to be on the market, and realize within a quick inspection that the property is their dream home.
Nevertheless, there are benefits to buying brand new, as there are to buying an established property, and it’s imperative that you and your family weigh up these benefits before making any final decisions regarding the pathway you’ll be taking.
4. The value of a mortgage broker
Mortgage brokers are essentially the middle man between lenders and buyers. They make their living by finding the home loan that works best for you and your family, and this makes mortgage brokers a genuine asset to any serious first home buyers.
As your mortgage broker can support you through both your approval as well as your pre-approval, it’s highly recommended that you stay with the same broker throughout this process, to ensure an easy transition from these two different stages.
If you’re concerned about the accreditation of your broker, be aware that mortgage brokers in Australia are required by law to carry an Australian Credit License (or ACL) if they offer credit assistance services. They are also expected to comply with the Australian Securities & Investments Commission’s (ASIC’s) regulatory guide for mortgage brokers, which specifically outlines that brokers must always act in the best interests of their clients.
5. The hidden costs of loans
On top of communicating with your broker, there are other aspects of applying for or even choosing a home loan that you’ll need to be familiar with prior to signing any paperwork.
Contrary to popular belief, the lowest interest rates don’t always equate to the best value home loans. You’ll want to consider the fees associated with that home loan alongside its interest rate, as higher fees may infringe on the potential savings of your selected loan. You want to ensure that you have a thorough understanding of your home loan fees so that you can adequately develop a realistic budget following the purchase of your first property.
6. The costs of living post-purchase
Finally, speaking of budgeting, it can be tricky knowing just what your finances will look like post-purchase, especially with your first home. Even so, it’s imperative that first home buyers have a firm understanding of what their finances will look like following the purchase of their first home. You’ll want to factor mortgage repayments alongside council rates, utility bills, and finally also your estimated costs of living, to ensure that your new home is not above your means.
If you have any queries regarding the budget that will be needed to make your mortgage repayments, consider consulting with your broker prior to signing any paperwork, or with another financial consultant.
As you can see, there are a plethora of factors that need to be considered prior to buy your first home. So long as you do your homework, use the resources available to you, keep records of your finances, and ask plenty of questions along the way, chances are you’ll have a highly positive experience with the purchase of your first home.