Thinking About Buying Your First Home? Here’s What You Need to Know!

Buying your first home in Melbourne is an exciting journey, but it’s also one that comes with many challenges. You’re probably asking yourself, “Where do I even start?” Don’t worry, AxJ Finance Brokers are here to guide you through every step of the process, from setting your budget to finally getting the keys to your new home. Let’s break it down together.

1. Let’s Talk Budget: What Can You Really Afford?

Before you start dreaming about your perfect home in Melbourne, it’s essential to get a clear picture of your budget. This isn’t just about what you’d like to spend, but what you can spend without stretching yourself too thin. Here’s how to start:

Calculate Your Borrowing Power

Start by using online home loan calculators to get a general idea of how much you can borrow based on your income, spending, and debts. These tools give you a starting point, but remember, they’re only estimates. It’s essential to think about how much you’re comfortable repaying each month, especially if interest rates rise in the future.

Set a Savings Goal

Now that you have an idea of your borrowing power, let’s talk savings. Ideally, you’ll want to save at least 20% of the property’s value for your deposit. Why? Because saving less might mean paying Lenders Mortgage Insurance (LMI), which can make your loan more expensive.

Plan for Additional Costs

Have you thought about the other costs involved in buying a home? I’m talking about stamp duty, legal fees, inspection fees, and even moving costs. These can add up quickly, so it’s wise to budget for them from the start. Don’t worry, though—Melbourne offers some stamp duty concessions for first-time buyers, which we’ll discuss later.

Action Steps:

• Use an online calculator to determine how much you can afford to borrow.
• Start a dedicated savings account for your home deposit.
• List out all potential additional costs and start factoring them into your budget.

2. Preparing Your Finances: Are You Really Ready?

Before you can start making offers on properties, you need to ensure your finances are in the best possible shape. This will not only improve your chances of getting a home loan but also help you secure better terms.

Check Your Credit Score

Your credit score matters more than you might realise. It’s one of the first things lenders look at when considering your loan application. If you have any outstanding debts, now is a good time to pay them off or combine them into one. This can boost your credit score and free up more money for your home deposit.

Consolidate Debts

If you have multiple debts—like credit cards, personal loans, or even Afterpay, it might be smart to combine them into one loan with a lower interest rate. This can simplify your payments and free up more money to save for your home deposit.

Secure Pre-Approval

Getting pre-approval for a home loan should be one of your top priorities. It’s a smart move because it shows sellers you’re serious, and it gives you a clear idea of what you can afford. It’s a good idea to start this process early, as it can take time to gather all the necessary documentation and get approval from the lender. Plus, in Melbourne’s competitive market, being pre-approved can give you an edge over other buyers.

If you need assistance with getting your finances in shape, our team at AxJ Finance Brokers is ready to help.

Action Steps:

• Obtain and review your credit report, and take steps to improve your score if needed.
• Consider consolidating any existing debts to simplify your finances.
• Begin the pre-approval process with a lender or mortgage broker.

3. Understanding Melbourne’s Property Market: What Should You Expect?

Melbourne’s property market is unique, and as a first-time buyer, it’s essential to understand what you’re getting into:

Research the Suburbs

Melbourne is a city of diverse suburbs, each with its own character and price range. Whether you want the excitement of the city or the peace of the suburbs, research is key. Look into factors such as proximity to work, public transport, schools, and amenities. Also, consider the long-term potential of the area—are property values rising, and is there ongoing development that could affect your decision?

Attend Auctions and Inspections

Melbourne’s property market can move fast. The best way to get a feel for the Melbourne property market is by attending auctions and open houses. This allows you to see how much properties are selling for, the level of competition, and the condition of homes in your desired area. Observing these dynamics firsthand can be invaluable when it comes to making your own offer.

Be Ready to Act Quickly

When you find the right property, are you ready to make an offer? Melbourne’s property market moves fast, especially for desirable properties. So, once you find a home that meets your criteria, you need to be ready to make an offer quickly. This is where your pre-approval and thorough research will pay off, giving you the confidence to act decisively.

Action Steps:

• Choose a few Melbourne suburbs to focus your search on based on lifestyle and budget.
• Regularly attend open houses and auctions to understand market conditions.
• Have your pre-approval ready so you can make an offer as soon as you find the right property.

4. Finding the Right Home Loan: Which One is Best for You?

With so many home loan options available, it can be challenging to know which one is right for you. The key is to understand the basics and select a loan that matches your financial needs and goals.

Fixed vs. Variable Interest Rates

When deciding between a fixed or variable interest rate, think about your financial stability and tolerance for risk. A fixed-rate loan offers certainty, as your repayments won’t change during the fixed period. This can be reassuring in a volatile market. On the other hand, a variable-rate loan can be more flexible and potentially cheaper if interest rates fall, but your repayments could increase if rates rise.

Principal and Interest vs. Interest-Only Loans

For most first-time buyers, a principal and interest loan is the best choice. This type of loan allows you to pay down the amount you’ve borrowed (the principal) over time, along with the interest. But, have you considered how an interest-only loan might work if you’re looking to keep your repayments lower in the short term?

Should You Use a Mortgage Broker?

If you’re feeling overwhelmed by all the loan options, a mortgage broker could be a great help. They can help you compare loans from different lenders, explain the fine print, and even negotiate better terms on your behalf. Their services can save you time and potentially thousands of dollars in the long run.

Action Steps:

• Choose between a fixed or variable interest rate based on what works best for your finances.
• Determine if a principal and interest loan is the right choice for you or if an interest-only loan might be more appropriate.
• Reach out to a mortgage broker to help navigate the various loan options available.

5. Government Grants and Incentives: Are You Taking Advantage?

The Victorian government offers several grants and incentives to help first-time home buyers in Melbourne, which can significantly reduce your costs and make entering the property market more achievable.

First Home Owner Grant (FHOG)

If you’re buying or building a new home valued under $750,000, you may be eligible for the First Home Owner Grant of $10,000. This grant is a one-off payment and can be a substantial help in boosting your deposit or covering other costs.

Stamp Duty Concessions

Did you know that as a first-time buyer, you might be eligible for a full exemption from stamp duty on homes below a certain price? In Victoria, properties valued under $600,000 may qualify for a full exemption, and those up to $750,000 may be eligible for a reduced rate.

First Home Super Saver Scheme

The First Home Super Saver Scheme lets you save for your first home through your superannuation fund, benefiting from the tax advantages of super contributions. You can contribute up to $15,000 per year, with a total cap of $50,000, to help you reach your savings goal faster.

Action Steps:

• Check if you qualify for the First Home Owner Grant and start the application process if applicable.
• Calculate potential stamp duty savings with the available concessions.
• Explore the First Home Super Saver Scheme as a way to accelerate your savings.

6. Finding Your Dream Home: What Are You Really Looking For?

Once your finances are in order and you’ve identified your preferred suburbs, it’s time to start searching for your new home. This is where your preparation pays off, but it’s also where you need to stay focused and level-headed.

Make a List of Must-Haves

Before you start house hunting, make a list of your non-negotiable features. This could include the number of bedrooms, outdoor space, how close it is to public transport, or the type of neighbourhood. Having this list will keep you focused and help you avoid falling for a property that doesn’t fully meet your needs.

Attend Open Houses

Have you started visiting properties yet? Visiting properties in person is crucial. Photos and online listings can be misleading, so attending open houses allows you to get a true sense of the space, the layout, and the condition of the home. Take your time during these visits—look beyond the surface and think about how the property meets your needs both now and in the future.

Get a Building and Pest Inspection

Before making an offer, always arrange for a building and pest inspection. This is a critical step to ensure there are no hidden issues with the property that could lead to costly repairs down the line. It’s better to be safe than sorry.

Action Steps:

• Draft a list of must-have features for your new home.
• Schedule and attend open houses in your chosen suburbs.
• Always get a professional building and pest inspection before making an offer on a home.

7. Making an Offer: How Do You Do It Right?

So, you’ve found the perfect home—what’s next?

Negotiate with Confidence

When it comes to making an offer, do your research. Knowing what similar properties in Melbourne have sold for gives you a strong negotiating position. It’s important to stay realistic—while you want to get the best deal possible, a lowball offer might not be taken seriously in a competitive market like Melbourne.

Consider Including Conditions

When making your offer, you can include conditions to protect yourself. Common conditions include securing finance, satisfactory building and pest inspections, or a longer settlement period if needed. These conditions provide you with an exit strategy if something unexpected arises.

Be Prepared to Negotiate

Don’t be discouraged if your first offer isn’t accepted. Negotiating is a normal part of buying a home. If the seller asks for more, think about whether it fits your budget and how much you really want the property. Stick to your budget, and don’t feel pushed to spend more than you can afford.

Action Steps:

• Look into the prices of similar homes recently sold in the area you want.
• Prepare your offer, including any conditions that are important to you.
• Be prepared to negotiate, but make sure you stick to your budget.

8. The Final Steps: Are You Ready for Settlement?

You’re almost there, but there are a few more steps to finalise your purchase:

Hire a Conveyancer

Have you hired a conveyancer yet? They’ll handle the legal aspects of the purchase, ensuring everything is in order for settlement. This includes reviewing the contract of sale and conducting title searches.

Final Inspection

Just before settlement, it’s a good idea to do a final inspection of the property. Has anything changed since your initial visit? This is your last chance to ensure everything is as it should be before you take ownership.

Settlement Day

On settlement day, your conveyancer will take care of transferring the money and legal ownership of the property. Once everything is settled, you’ll get the keys to your new house. It’s a good idea to have your moving plans in place ahead of time so you can start enjoying your new space as soon as possible.

Action Steps:

• Engage a conveyancer to manage the legal aspects of your purchase.
• Make sure to do a final inspection of the property before settlement.
• Organise your move and be ready for settlement day.

9. Moving In and Managing Your Mortgage: What Comes Next?

Congratulations, you’re now a homeowner! But the journey doesn’t end here. It’s important to stay on top of your mortgage and ensure that your new home remains a source of joy rather than stress.

Move-In

Have you planned your move yet? Moving can be stressful, but with good preparation, it can go smoothly. Whether you’re hiring professional movers or doing it yourself, make sure everything is organised ahead of time. Don’t forget to set up utilities, internet, and any other services you’ll need in your new home.

Review Your Mortgage Regularly

Now that you have your home, it’s important to keep on top of your mortgage. Interest rates and financial products can change, so it’s worth checking if you could benefit from refinancing or adjusting your repayment strategy. Even small changes can make a big difference over the life of your loan.

Stay on Top of Maintenance

Owning a home comes with the responsibility of keeping up with maintenance and repairs. Regular care not only protects your investment but also keeps your home comfortable. Set up a schedule to track what needs to be fixed and when.

Action Steps:

• Plan and organise your move carefully to make sure everything goes smoothly.
• Set a reminder to review your mortgage annually.
• Keep your home in great shape by creating a regular maintenance schedule.

Wrapping Up: Ready to Take the Next Step?

Buying your first home in Melbourne is a big step, but with careful planning and the right guidance, you can make the experience smoother and more enjoyable. Remember, you don’t have to do it alone. Seek advice from professionals, take your time to research, and don’t be afraid to ask questions. This is your journey—make sure it’s one you’ll cherish.

Whether you’re ready to buy your first home or just need some advice, our mortgage broker is here to help. Let’s turn your dream of owning a home in Melbourne into a reality.

Whether you’re ready to buy your first home or just need some advice, our mortgage broker is here to help.