Home' API Magazine : September 2014 Contents 25
API SEPTEMBER 2014
SEPTEMBER 2014 API
risk being priced out of the market. She
says a first homebuyer with a five per cent
deposit who plans to purchase a property
worth $450,000 would be forced to pay up
to $13,000 in LMI fees. But saving a full
20 per cent deposit would take years and
could cost even more.
“ In a market which moves at 10 per
cent, the first homebuyer would be facing
a property which is valued closer to
$500,000 after the first year,” Bakos says.
There’s a shortcut, but it’s not for
everyone. A family pledge loan or
guarantor loan can help you avoid paying
LMI fees but it means your parents
would have to offer their own property as
Some banks require the full 20 per cent
deposit for an apartment smaller than 50
square metres or in a company title, rather
than a strata title. There are also still some
grants available for brand new property,
depending on the state you live in.
Commonwealth Bank of Australia
Brisbane city branch manager Ewan
Ramsey says any type of grant would help
to reduce LMI fees.
“ In some cases, the grant can be used as
part of the five per cent deposit, as long as
the mortgage insurer approves the special
circumstances involved, i.e . if customers
have been paying down debt instead of
saving for a home deposit,” he says.
¿ FINDING A LOAN
Now that you’ve saved money and got
your deposit, how do you find a loan? In
some cases it’s simply a matter of visiting
a few different banks, or you might prefer
to use a mortgage broker.
“ T he starting point is getting the best
rate, but that’s not necessarily the best
thing for clients,” Ghoreyshi explains.
“ You have to live with your loan every
day, so it’s the functionality, its features.”
For example, you might be a young
couple planning on having a baby in a few
years. If that’s the case, you might want
to take on a loan that gives you the option
to change from principal and interest,
to interest only. You might also want to
switch from a variable rate to a fixed rate,
to give you more certainty. Whatever the
case, make sure the loan works for your
circumstances and future goals.
“ If you plan to eventually turn your home
into an investment property, then taking
a loan that doesn’t provide you with an
offset account facility may in effect cause
long lasting complications,” Ramsey says.
It’s always a good option to get pre-
approved finance, that way you know
exactly what your limit is. Bakos believes
brokers can be beneficial for first
homebuyers, but she warns they need to
know their stuff.
“I f the broker makes multiple applica-
tions, the first homebuyer will have credit
enquiries on their credit file. Multiple
enquiries in a short space of time can
work against the borrower, so they
need to be careful and deliberate about
securing the first loan they apply for.”
¿ DOTTING THE I’S
Found your dream property? Don’t forget
to get a building and pest report, along
with a body corporate search. This will
pick up any potential problems, such as
having to spend $30,000 to fix a retaining
wall, or something else the body corporate
might have voted on. It’s also a good
idea to get a depreciation schedule, if
you’re buying your first property as an
investment. It allows you to claim on
depreciating assets, meaning you’re likely
to get a bigger tax return at the end of the
If you’ve bought an investment and
you’re really struggling with repayments,
or worried about the huge mountain of
debt you’ve just taken on, you can also
consider a ‘pay as you go’ (PAYG) option,
which gives you your estimated tax
break back throughout the year with your
weekly salary. It’s best to chat with your
accountant about that one.
But by far the most important element
to check, according to Bakos, is to make
sure a lawyer goes over the contract
before you sign anything.
“ Properties which can have unusual
titles, zonings other than residential,
difficult special conditions, caveats and
certain overlays can represent problems
for a buyer,” she says.
If in doubt, always make sure the
contract is ‘subject to finance’ .
¿ A FINAL TIP
Despite the bad wrap some real estate
agents receive, Bakos says that agents
can actually be your best friends, if you’re
decisive and know what you want.
“ If the agent can see that you have a
robust plan and you’re realistic about
the price you’ll need to pay, you’ll be
surprised at how helpful some of them
might be,” Bakos says.
“ Agents can introduce buyers to
properties before the photographers even
get through – these are known as ‘off
“ Having an opportunity to buy a
property without any competition is a
really nice bonus in this sellers’ market.
Be decisive and be nice.” API
Michelle Chee’s advice for first homebuyers
is to stop procrastinating.
“Don’t be afraid of debt,” she says.
“As long as you have a steady income and
you can make repayments, there shouldn’t
be anything holding you back.”
The 24-year-old has just made one of
the biggest financial decisions of her life.
She settled on her first property a few
months ago, forking out $350,000 for a
one-bedroom unit in the Brisbane suburb
of New Farm. Michelle didn’t have to pay
mortgage insurance because she saved
an impressive $70,000. Being a first
homebuyer, she also didn’t have to pay
It’s always hard getting that deposit, but
Michelle was able to fast-track her savings,
thanks to a little-known government
incentive known as the first home saver
account which no longer exists.
“For first homebuyers, it’s all a matter
of setting aside an amount to put into an
account each month,” Michelle says.
“The home saver account wasn’t popular
but it was actually really good. The best
thing was, any money that was put away,
you couldn’t take out. It forced me to save.”
Buying her first property was a bit of a
daunting process, so Michelle was keen to
stick to one of the big four banks for a loan.
She visited three of them, before deciding
to go with the one she already used for her
personal bank account. Michelle asked her
mother to help her with some of the bank
visits, but most of it was done by herself.
“I definitely did my research first and
I wrote down a list of questions for the
bank,” Michelle says. “I asked things like
‘what interest rate am I going to get with
a variable versus a fixed?’ and ‘what are
the terms and conditions to lock in? Can I
redraw any extra repayments I make?’”
Once Michelle has lived in her property
for 12 months, she plans to move back
home with her parents, then use the equity
and save more money for a deposit on a
Name: Michelle Chee
Lives: New Farm, Brisbane
Strategy: Buy and hold
SAVING TO SPEND \\ FIRST HOMEBUYER
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