I’m a first-home buyer. What do I need to know?
Are you a first-home buyer?
Have you saved up enough money for a house deposit, obtained finance approval and found your dream home?
The next thing that you need to do is avoid the mistakes that first-home buyers often make.
In this blog, we tell you what they are and how to avoid them.
First time buyers DO NOT consider shared ownership.
Purchasing your first property with a trusted friend or family member is a good way to relieve some of the financial strain that comes with buying real estate on your own.
But, before you decide to buy your first home with someone else, ensure that you speak with a lawyer first. They will:
- ask you about the type of relationship you have with the other person.
- explain to you what the advantages and disadvantages of shared ownership with family or friends are.
- advise you on the best way forward. For instance, do you need a legal document which details your arrangement and what happens to the property if things get messy (e.g. if you separate and the other person wants to sell)? Is it best not to buy the property with this person at all?
First Time buyers DO NOT arrange a pre-purchase building and pest inspection.
You should always have a building and pest inspection done on a property you intend to purchase before you purchase it.
A building and pest inspection report will tell you if the property has any significant building defects (e.g. a faulty roof) or pest issues (e.g. termites).
If you identify these problems before the exchange of contracts, you can:
- use them to negotiate a lower purchase price for the property; and
- seek advice from a professional about how these problems might affect the property moving forward.
First time buyers DO NOT know whether they are entitled to financial assistance from the government.
The NSW and Federal Government provide financial support to those in NSW who are buying property or vacant land to build a home for the first time.
Here is the financial assistance that NSW first-home buyers may be eligible to receive:
- a First Home Owner (New Homes) Grant;
- reduced or no stamp duty on their purchase;
- no requirement for lenders’ mortgage insurance even if they have a deposit of 5 percent (or 2 percent if they are a single parent); or
- the opportunity to use their superannuation fund to save for their home.
To be eligible, first-home buyers must meet certain criteria. You can find out what that is here.
First time buyers DO NOT engage a property lawyer to review the contract.
After you buy a property, a real estate agent will normally hand you a contract to sign.
Do not sign the contract until you have had it reviewed by a property lawyer! You will be bound by its terms unless you can find a valid legal reason to terminate the contract.
While engaging a lawyer to review the contract and handle the conveyancing process will cost you money, you can rest assured that they will:
- explain the contract to you and what your obligations are;
- ensure that the contract includes everything that it needs to;
- request the vendor to remove any unnecessary terms before you sign it;
- make you aware of any key dates; and
- ensure that the conveyancing process and settlement goes smoothly.
First time buyers DO NOT obtain approval for more finance than they are likely to need.
When settlement of your purchase occurs, most people know that they will be responsible to pay the purchase price. What they sometimes forget is that they will need to pay stamp duty, registration, legal and any other unexpected fees too.
So, if you need a loan from a bank or financier to make your purchase happen, obtain approval from your bank or financier ahead of time. Failure to do so will result in settlement being delayed.
First time buyers DO NOT do their research with the local council.
It is worth visiting the council in the area where the property you intend to buy is. This will help you to find out whether the property you intend to purchase is:
- prone to natural disasters like flooding or bushfires.
- subject to town planning permits. Is the council permitted to use your land for development or a certain use.
- under a section 173 agreement. This is when the council can force certain restrictions on your property.
First time buyers DO NOT consider existing tenants in the property.
If the vendor has existing tenants in the property you seek to purchase, bear in mind that you will inherit any arrangement that they have made with the tenants.
While the vendor is obliged to tell you everything about this tenancy in the contract, it is still worth having a discussion with the tenants prior to settlement to find out if there have been any ongoing problems or if they intend to vacate the property.
Buying your first home is an achievement in today’s property market.
So, it is important that you seek legal advice and do your due diligence to ensure that this milestone does not turn into a headache.