Embarking on the journey to buy your first home can be both exciting and overwhelming. At SW Brokerage, we understand the challenges you might face and are here to simplify the process for you. To ensure you feel confident and informed, we’ve developed SWB Way—our detailed guide on navigating your financial journey and understanding key concepts.
Here’s everything you need to know to make your home-buying experience as smooth as possible:
Key Terms and Concepts
What is a Deposit? How Much Do I Need?
A deposit is the initial sum of money you pay towards the purchase of your home. It typically represents a percentage of the property’s total cost. For example, on a $500,000 home, a 10% deposit would be $50,000. While the standard deposit ranges from 5% to 20% of the purchase price, the exact amount required can vary based on your lender’s policies and the loan type. Having a larger deposit often means better loan terms and lower interest rates.
What is Lender’s Mortgage Insurance (LMI) and Should I Pay It?
Lender’s Mortgage Insurance (LMI) protects the lender if you default on your loan. It’s generally required if your deposit is less than 20% of the property’s value. The cost of LMI can be substantial, potentially ranging from $15,000 to $30,000 for a $700,000 property. If you qualify for the First Home Buyers Guarantee Scheme, you may be able to avoid paying LMI, saving you a significant amount of money.
What is a Guarantee?
A guarantee is an arrangement where a third party, such as a family member, agrees to cover your loan repayments if you default. This can be a valuable option if you have a smaller deposit but have a reliable supporter willing to back your loan. It can also help you avoid LMI and secure a loan with more favourable terms.
What Are Genuine Savings?
Genuine savings are funds that you’ve saved over time in your own accounts or investments, rather than money received as gifts or loans. Lenders use genuine savings to gauge your financial stability and discipline. Typically, lenders prefer to see savings accumulated over at least three to six months to demonstrate your ability to manage money effectively.
The Four Steps to Buying Your First Home
- Nail Your Deposit and Budget
Before you start house hunting, it’s crucial to determine how much you can afford and save up for your deposit. Your budget should not only cover the deposit but also additional costs such as stamp duty, legal fees, and moving expenses. Knowing your financial limits helps set realistic expectations and avoid overextending yourself.
- Navigate the Loan Process
With your deposit and budget in place, the next step is to explore your loan options. Seek pre-approval from lenders to understand how much you can borrow. The pre-approval process involves providing financial documents and typically takes 1-2 weeks. This step gives you a clearer idea of your borrowing capacity and strengthens your position when making an offer on a property.
- Understand Industry Jargon and Concepts
Familiarise yourself with common industry terms and concepts like interest rates, loan terms, and repayment options. Understanding these terms helps you make informed decisions and avoid surprises. If you encounter any jargon you don’t understand, don’t hesitate to ask for clarification from your mortgage broker or financial advisor.
- Find Your Dream Home
With your budget and loan pre-approval in hand, start searching for your ideal home. Consider key factors such as location, property type, and your long-term plans. Once you find a property that fits your criteria, make an offer. Be prepared to navigate through the legal and financial steps required to finalize your purchase.
The SWB Way: Our Ongoing Relationship
At SW Brokerage, our support extends beyond just arranging your loan. We believe in building an ongoing relationship to ensure your financial journey remains on track. Here’s how we assist you throughout the process and beyond:
- Pre-Approval and Application
We start by assessing your financial situation, identifying potential borrowing power, and exploring available incentives. Once you’re ready, we organize a pre-approval, which provides a clearer picture of your borrowing capacity and strengthens your offer on a property.
- Finding and Securing Your Home
When you’ve found a property, we assist with property reports and offer strategies to make your offer more attractive. Once your offer is accepted, we handle the necessary paperwork, coordinate with your solicitor, and manage the final loan approval process.
- Settlement and Beyond
On settlement day, we ensure everything is in order and that you’re informed of all necessary steps. After settlement, we confirm loan details and repayment schedules. We also connect you with financial professionals to review your overall financial situation and insurance needs.
- Ongoing Support
Our commitment to you doesn’t end with the loan. We maintain an ongoing relationship to monitor your rate, offer financial advice, and support your future financial goals. We proactively reach out to ensure you’re always in the best position.
Congratulations on taking the first step toward homeownership! If you have any questions or need assistance at any stage of the process, don’t hesitate to contact us. At SW Brokerage, we’re here to guide you every step of the way.
For personalised assistance and expert advice, call us at 3371 1603 or email info@swbrokerage.com.au. Let’s make your home-buying journey as smooth and successful as possible!