Buying a house: what to do when it's your first
1 July 2022Section Heading
Buying your first home is an exciting milestone, but it can also feel overwhelming. From saving a deposit and securing a home loan to exploring government schemes like the First Home Super Saver and ensuring you're financially prepared for ongoing commitments, the journey requires careful planning.
This guide outlines key steps to help you navigate the process and turn your dream of home ownership into reality
Save, save, save! Always be saving
The journey to buying your first home starts with saving – and lots of it!
Ideally, you’ll be putting aside enough money to make up a 20% deposit for the home you want, plus enough to cover stamp duty and other related fees such as Lenders Mortgage Insurance (if needed). The bigger your deposit is, the smaller your loan and the less you’ll pay in interest over the long run.
How do you save effectively?
Start with creating a budget. Use the budget to track your income and expenses so you can then work out exactly how much you can realistically put towards the loan deposit each month, without compromising too much of your lifestyle. Tool’s like MoneySmart’s budget calculator can really help with getting started.
Remember, buying a house is a long-term commitment. Even with a sizable deposit, you’ll likely be repaying your loan for many years. The key to maintaining this commitment is taking a healthy and balanced approach – save diligently but don’t overextend yourself.
Find the best home loan interest rate
Taking out a home loan is essentially taking out a large, long-term debt. This is why securing the best home loan interest rate should be a top priority. Even a small difference in rates – say, 0.5% per year – can save you thousands over the life of the loan.
To get the best home loan interest rate possible, shop around and compare lenders. By doing so, you get to better understand your options.
If connecting with lenders seems daunting, you may want to speak with a licensed mortgage broker.
A good broker acts as an intermediary between you and lenders. They can play the role of an educator and explain to you how home loans work, and can even handle the application process. They can really save you time and a lot of stress!
Saving through your super with the First Home Super Saver Scheme (FHSS)
The FHSS scheme, introduced by the Australian Government, lets you save a first home deposit in your super account through voluntary contributions (such as salary sacrifice and after-tax contributions).
With this scheme, you may pay less tax and grow your savings faster. Government estimates suggest the FHSS scheme can help most people save about 30% more compared to a standard bank deposit account.
While Super SA’s Triple S is excluded from the FHSS scheme under government rules, Super SA Select and Flexible Rollover Product allow you to take full advantage and build your deposit within your super account.
How does it work?
You make voluntary contributions (like salary sacrifice or after-tax contributions) of up to $15,000 per financial year into your super. You can contribute a maximum lifetime cap amount of $50,000. Once you’ve found your dream home, you can withdraw up to $50,000 and put it towards your first home.
If you have a partner, they too have a maximum lifetime cap of $50,000. This means together you could make up to $100,000 in super contributions to save for your first home.
Just keep in mind that you’ll need to apply for and receive an FHSS determination from the ATO before signing a contract or accessing your super funds. You can learn more here: First Home Super Saver Scheme or get in touch with our Member Services team on (08) 8214 7800. They’d be happy to chat.
Don’t skip building insurance
Home insurance might not be legally required, but most lenders make it a condition of your loan that you have building insurance before settlement. Even if they don’t require it, it’s a no-brainer. Accidents happen, and without coverage the repair costs will be entirely out of your pocket.
Imagine saving for years, finding your dream home, seeking out the perfect home loan rate and then facing major out-of-pocket expenses because of an unexpected mishap.
Before you sign the contract that finalises the purchase of your property and puts you into the settlement period, make sure you have your home insurance in place. It’s worth the peace of mind.
