First Home Buyers
Buying your first home can be one of the most enjoyable and rewarding tasks you will ever undertake. Unfortunately, at the same time, if first home buyers get it wrong it can also be one of the most stressful things you ever do and the most expensive mistake you might ever make. It is also likely to be the biggest single ongoing financial commitment first home buyers will have undertaken at the time they make their first home purchase. It is thus very important for first home buyers to not rush into it, but instead take your time and buy wisely. If you are buying with a friend or friends, or with a family member or members, please see additional information on the Buying with Friends or Family page on this site.
Since first putting up this page I have retrained and completed a Certificate IV course in Real Estate Sales and Property Management and started work as a Real Estate Sales Agent for Lin Andrews Real Estate Morphett Vale franchise. I am still mortgage broking and find that the two roles dovetail well. I also like to think that being a qualified Real Estate Sales Agent makes me a better Mortgage Broker and vice versa.
Some tips for you:
- Find and use a reputable mortgage broker.
- Find and read various sources of information about buying your first home. See the links page on this site for useful downloads
- Determine how much you can borrow and make your mind up if you as an individual or couple can realistically stick to the repayments. You can borrow more in Australia, for example, than you can in the UK, as a multiple of your single or joint incomes. I would recommend that you allow your mortgage broker to calculate the maximum you can borrow. However well-intentioned, online mortgage calculators cannot take into account your particular circumstances and could be wildly misleading as to the maximum you can borrow. Whether you are capable of keeping up with the repayments should be your decision, however, and nobody else’s.
- Factor in one-off expenses such as Christmas or any other religious festival you may observe and of course an annual holiday if you intend to take one (or two!). You may also need to replace your car or motorbike or set aside some extra money in case your car needs an expensive repair. Be careful to not over-commit yourself in your rush to own your first home. Some other expenses you may not have thought about include legal and conveyancing fees, property inspection fees, removalist cost, any outstanding council rates, insurance (building and contents), immediate repairs required, and furniture you may need to buy.
- Determine whether you are eligible for the First Home Owner’s Grant. Don’t forget there is also, for a limited period, the First Home Owner’s Bonus Grant for those who have their first home built or buy a brand new property that has not been previously occupied.
- Make Sure you have a Deposit plus Fees and Charges.Most lenders will lend you up to 95% of the value of your property (for a purchase but only 90% for a refinance) plus another 2% to cover Lender’s Mortgage Insurance (LMI). If you are borrowing more than 90% then LMI, which is calculated at a progressively higher percentage of the purchase price, can become a hefty additional expense indeed at up to 4% or more. It is quite common for the amount you can borrow against the property therefore to be less than 95% as the LMI might be as much as 4% so the amount being available to pay towards the property would then be reduced to only 93% (97% maximum – 4% LMI). If you don’t have the required 5% genuine savings for a sufficient deposit you could perhaps borrow the deposit from a close relative or receive a gift of the deposit from a relative or buy with a friend. Quite apart from the 5% deposit you will also need a further 5% approximately, to pay government fees and charges (stamp duty and registrations fees plus search) plus a conveyancer or solicitor’s fee, plus cash to refund rates or water charges already paid by the vendor and so forth. If the deposit is gifted it must remain in your account for three months to be considered “genuine savings” or alternatively if you borrow only 80% or less (having been gifted the rest) then the 5% genuine savings requirement is waived by most lenders. Alternatively you could ask a close relative to offer a family pledge. Under this scheme you can borrow over 100% of the value of the property you intend to buy AND avoid lender’s mortgage insurance. Seems almost too good to be true, but it is. Click here to see details. If you have been living in a rental property then the rent you have been paying can be taken into account as “genuine savings” by some lenders so when you have been gifted the deposit you won’t have to wait for three months for this to be counted as genuine savings as your rental payments will be taken into account on this point.
- Get pre-approval for your first home purchase. That way you can avoid wasting your time finding a property that your proposed lender then decides you cannot afford or that for some reason or other you cannot obtain finance for. Alternatively someone else may beat you to the purchase as they have been pre-approved and have a couple of days or more head start on you. There is little point in looking at properties if you have not been pre-approved. The danger is that if you don’t get pre-approval before you even start to look at properties, you or your partner will find a property you set your heart on, and then start to try and pressurise the bank or your mortgage broker in an attempt to hurry things along. The banks will work at their own pace, your broker will have little influence over this and no number of telephone calls, emails or text messages will make it happen any quicker.
- Choose your first home carefully. Do you really need a house or would a unit be more suitable? Is a garden essential? Remember, it will need looking after. Are links to local schools, hospital and shops close by? What is public transport like in the area if you have children? Do you want to live in the city, hills or seaside? Do you want to be close to a park? Can you park outside the property or does it have off-street parking? A free RPData report should answer a lot of these questions and others you might think of when considering a property as your first home in Adelaide and save you a lot of time in the process. Let me know if you have a property in mind and I will send you a Free RPData report on it and the rest of the surrounding area
- Use a property checklist to refer to so that you can compare the various merits and demerits of the different houses in which you are interested.
10. Air conditioning should ideally be on your “essential” list rather than your “if possible” list. A few days of 40+ degrees would quickly convince you of this; Adelaide had 6 consecutive days of 40+ degrees from the 27th January to the 7th February 2009. A good air conditioning system also adds to the value of a property.
11. Pay someone to carry out a professional property report for your intended purchase. Before making an offer you should arrange for a building inspection but only by a qualified inspector. It is important that you do this as there are a number of potential problems such as movement, drainage issues, potential plumbing and electrical problems and many more that you may not notice. In Adelaide, South Australia, for example, there are “reactive soils” (basically wet clay deep underground) and you need to be aware of any potential problems before you commit to buying a property. Of all the Australian capital cities, Adelaide is known to be the driest. Consequently subsidence as the result of recent droughts which dried out the layers of reactive clay deep in the ground has been a problem in Adelaide in particular after having been “rock solid” for several decades. Apparently certain suburbs to the north of Adelaide have been particularly badly affected by this.
It is as well to also have a pest inspection carried out once the building inspection has been completed if you are still interested in buying the property. There are a number of potential pest problems in Adelaide including termites (or white ants as they are otherwise known) wombats (a protected species) cockroaches and other pests you probably would not think of. You need to make sure you are not breaking any laws when dealing with wombats because of their protected status. The website of “Home Improvement Pages” will give you a wide choice to choose from. Ask for references before choosing an inspector. Certain building inspectors are also qualified to carry out pest inspections.
12) The Real Estate Agent acting for the Vendor should give you a Form R3 which is the “Buyer’s Information Notice.
The Form R3 is a general statement of issues and information for the purchaser to consider when buying a home.
It is only required for residential land and the obligation is on the vendor to ensure service of the notice (or an agent if the vendor has appointed one).
Tricks and Traps of Form R3
The legislation requires that the vendor “must take all reasonable steps to deliver the prescribed notice to a purchaser when the purchaser is present on the land at the invitation of the vendor in order to inspect the land prior to its sale”.
The R3 must also be attached to the Form 1 served on the purchaser, even if the R3 has been provided previously.
Failure to serve the R3 does not necessarily void a sale contract, nor does it affect the cooling-off rights of the purchaser under the Form 1, but failure to serve the R3 is an offence.
This is what an R3 form contains:-
The questions have been categorised under the headings Safety, Enjoyment and Value, but all of the issues are relevant to each heading.
• Is there asbestos in any of the buildings or elsewhere on the property eg sheds and fences?
• Does the property have any significant defects eg cracking or salt damp? Have the wet areas been waterproofed?
• Is the property in a bushfire prone area?
• Are the electrical wiring, gas installation, plumbing and appliances in good working order and in good condition? Is a safety switch (RCD) installed? Is it working?
• Are there any prohibited gas appliances in bedrooms or bathrooms?
• Are smoke alarms installed in the house? If so, are they hardwired? Are they in good working order and in good condition? Are they compliant?
• Is there a swimming pool and/or spa pool installed on the property? Are there any safety barriers or fences in place? Do they conform to current standards?
• Does the property have any termite or other pest infestations? Is there a current preventive termite treatment program in place? Was the property treated at some stage with persistent organochlorins (now banned) or other toxic termiticides?
• Has fill been used on the site? Is the soil contaminated by chemical residues or waste?
• Does the property use cooling towers or manufactured warm water systems? If so, what are the maintenance requirements?
• Does the property have any stormwater problems?
• Is the property in a flood prone area? Is the property prone to coastal flooding?
• Does the property have an on-site wastewater treatment facility such as a septic tank installed? If so, what are the maintenance requirements? Is it compliant?
• Is a sewer mains connection available?
• Are all gutters, downpipes and stormwater systems in good working order and in good condition?
• Is the property near power lines? Are there any trees on the property near power lines? Are you considering planting any trees? Do all structures and trees maintain the required clearance from any power lines?
• Are there any significant trees on the property?
• Is this property a unit on strata or community title? What could this mean for you? Is this property on strata or community title? Do you understand the restrictions of use and the financial obligations of ownership? Will you have to pay a previous owner’s debt or the cost of planned improvements?
• Is the property close to a hotel, restaurant or other venue with entertainment consent for live music? Is the property close to any industrial or commercial activity, a busy road or airport etc that may result in the generation of noise or the emission of materials or odours into the air?
• What appliances, equipment and fittings are included in the sale of the property?
• Is there sufficient car parking space available to the property?
• Are there any illegal or unapproved additions, extensions or alterations to the buildings on the property?
• How energy efficient is the home, including appliances and lighting? What energy sources (eg electricity, gas) are available?
• Is the property connected to SA Water operated and maintained mains water? Is a mains water connection available? Does the property have a recycled water connection? What sort of water meter is located on the property (a direct or indirect meter – an indirect meter can be located some distance from the property)? Is the property connected to a water meter that is also serving another property?
• Are there water taps outside the building? Is there a watering system installed? Are they in good working order and in good condition?
• Does the property have alternative sources of water other than mains water supply (including bore or rainwater)? If so, are there any special maintenance requirements?
For more information on these matters visit:
Disclaimer: There may be other issues relevant to the purchase of real estate. If you are unable to ascertain enough information about the questions raised in this form and any other concerns you may have we strongly recommend you obtain independent advice through a building inspection, a lawyer, and a financial adviser.
Government of South Australia 2011.
13) Torrens, Strata and Community Titles
“In South Australia, property titles (or legal interests in property) fall under three main categories – Torrens Title (freehold), Strata and Community Titles. If you are planning to buy a home on its own block of land it is likely to be a Torrens Title property. If you buy a unit, flat, townhouse or apartment it may be strata or community title. A solicitor or conveyancer will be able to advise you on how the various types of title affect your ownership rights and responsibilities.”
Government of South Australia 2011.
For more information on the various forms of title please click on the following link:
If you are planning to buy a strata or community titled property, there are some important legal matters that you should know. You can download a 40-page pdf entitled “Strata and Community Titles” if you click on the following link from the Legal services Commission of South Australia website and scrolling down that page –
14) Making an Offer.
A property may be offered for sale at a predetermined price, within a price range (the lower figure it has been said, represents what the Real Estate agent has suggested, and the higher price what the vendor thinks the property is worth), or by auction. Regardless of the vendor’s wishes, you can make an offer to the agent based on what you are prepared to pay for the property. Your offer should be subject to certain conditions, including being approved for suitable finance, plus favourable building and pest inspections. You may withdraw your offer at any time before a contract is signed by both you and the vendor. Again, a Free RPData report would let you know what similar properties in the area have recently sold for. It can also show you similar properties (and the one you are considering) currently for sale in the area and how long they have been on the market, which is something the Real Estate is not likely to want to tell you, (remember he is on the vendor’s side) plus by how much the vendor has reduced the price since first placing it on the market. Just because the price has already been reduced does not mean you should offer the new asking price, but it’s your money. If you have a good look at your free RPData report you will find plenty of examples where a house has been substantially reduced in price and eventually sold for even less than the eventual reduced asking price.
15) The contract Cooling-Off period.
If you buy a property in South Australia, (apart from at an auction), you have the benefit of a cooling-off period to think about the purchase, carry out any further inspections, or simply decide against completing. The cooling-off period lasts for two clear business days from the making of the contract or the service of the Form 1, whichever comes the later. This is not long, so think hard and take advice, preferably professional advice, before you run out of time to withdraw from the transaction.
16) Things to do once it is all signed and sealed
Think of everyone that needs to be told you are moving which includes not just your personal contacts but every other institution or body that you deal with. You will need final readings for gas, electricity, water. You need to get a sticker for the back of your driver’s licence with your new address on. You also need to tell the Australian Tax Office you are moving. If you are self-employed you may need to tell other government bodies you are changing address. You may be due refunds for rates and so on. You need to make sure you tell your insurers you are moving. “Direct Connect” offer a FREE service to take care of your suppliers such as gas, electricity, telephone, internet service provider, Foxtel (pay TV) if you use it and other suppliers.
HOWEVER there are many more people and institutions you need to tell. Draw up a list and add to it as you remember additional people who need to be told. Have your post forwarded for the longest possible period. After you move, invest in a stack of envelopes and stamps and photocopy a letter bearing your name, old and new addresses and new contact details. Then when you receive a forwarded item of mail at your new address, stick a photocopied letter in the envelope and start to tell those who are still writing to you at your old address that you have moved. This is important as your mail will not be forwarded forever. Perhaps one of the more important ones to remember is your car registration. Now that we don’t receive a sticker for our windscreen which can serve as a reminder, if you don’t get in touch you may forget to renew your rego, as I did, and receive a hefty fine of $600 +. If your rego is not current, your third party insurance is also unpaid and your comprehensive insurance is also apparently invalid, if you have taken it out, so it is important to remember to let them know.
For other suggested contacts regarding changing address please refer to the page on this blog regarding Moving.
17) Buying at auction
A bold undertaking, indeed, for a first time buyer. Please see the page on Property Auctions elsewhere on this site. Here are some links to information that you may find very interesting. Remember, the rules may be different for South Australia, but if this doesn’t put you off as a first time buyer, nothing will!
18) Houses and Units for Sale
In no particular order, these are some websites where you will find a lot of property of all descriptions, for both sale and rent
Further information can be obtained by clicking on the following links. Please be patient when downloading the pdf’s, these take a little longer than loading a simple webpage.
If you need help getting a home loan or assistance with any of the issues covered on this site, please call me, Vincent Woodall directly on 0451 596 575 or you can send me an email to firstname.lastname@example.org or alternatively please complete and submit the enquiry form below.
I am a mortgage broker in Adelaide and I am –
- Fully accredited by the Mortgage & Finance Association of Australia
- Fully qualified with the Diploma of Finance and Mortgage Broking Management
- Plus I have satisfied stringent financial and criminal record background checks.
Find a home loan with someone you can trust and who will ensure you’re getting the right home loan for you. Vincent Woodall. 0451 596 575 or alternatively send me an email to email@example.com .