First Home Buyer Basics

June 2, 2019

Words by James Crabtree | Image credit Tony Cenicola

In my industry despite being comparably young to most other Finance Directors out there, I’ve gained some invaluable knowledge for first home buyers because that’s the age of most of my clients & I keep an eye out for any information that may help my client base and age group.

You can have $0 for  a deposit with a Guarantor

That’s right, you can contribute nothing to the purchase of your house & some lenders will lend up to 107% of the value of the property to cover stamp duty, LMI & settlement costs. Meaning your mum, dad, uncle or nana don’t need to contribute any money either just some of their equity in their house as security. Obviously a bank isn’t going to just lend you that money without a job, solid financial behaviour so don’t go out & tell your boss to F off.

No stamp duty if buying under 430k 

If you are a first home buyer, you get a concession from the government not to pay stamp duty up to 430K property price, with a discounted rate from 430K – 530K, then you are charged like any other person once you go above 530K. This isn’t pretty, for a 530K property you’ll be charged 20K in stamp duty.

Doesn’t have to be new to get 10k rebate

Generally speaking you’ll need to build or buy new to get the 10K First Home Buyers Grant, however not many realize you can buy a “substantially renovated” property & receive the 10K as well. The catch is, this property can’t have been lived in since the reno, the reno needs to have been a big one, not just the bedroom done up a bit.

If you are set on buying an apartment

With the amount of over supply in the Perth market especially but also in other cities, developers want them sold! So ask for them to fully furnish your apartment with new furniture/appliances for free & ask for a rebate which may help pay stamp duty.

They won’t generally drop their price for you to get a bargain because that drops the price of every apartment in that complex which hurts the valuations by the bank in the future. However the way to get a very good deal is by asking for these things as part of your offer.

Location does 80% of the heavy lifting

So this means close to the beach, close to the river or close to the city. Everyone’s budget is different & what drives your lifestyle will effect what area you buy in.

Look for gentrification in suburbs

This means those suburbs that did have state housing but they are now being sold off, coffee shops are starting to appear & young professionals are moving into the area. If you can buy in a gentrifying suburb you will see a much bigger lift in capital growth.

Land is king, not the house its on

If you are buying out in the new estates you may get a lot more land for that price, however your capital growth is going to be slower over time. Land closer to the city where there are no big estates being sold & land is scarce is the key for a smart purchase. Land is an appreciating asset, the house is a depreciating asset. With this in mind you should try to avoid the shiny new houses but look for the existing houses with some age behind them.

What is LMI? 

It is something the bank will tell you goes to insure them against you falling over & not being able to make the repayments. What it really is – a waste of money. You don’t receive any protection for this charge, so avoid it if possible, however unless you have a 20% deposit or a guarantor it’ll mean you have to add it to your loan.

No Comments

Leave a Reply