Buying your first home

Apart from your deposit, there are a few other upfront costs you’ll need to be prepared for. These include:

• Building and pest inspection
• Solicitors' fees
• Mortgage Registration Fee
• Lenders’ Mortgage Insurance (if applicable)
• Transfer fees - also known as stamp duty (if applicable)
• Home and/or contents insurance
• Strata fees – if you’re buying an apartment or townhouse
• Council rates and fees
• Moving costs.

You may also want to set some extra funds aside for emergency repairs after you move in. Or if you’re breaking free from share house life, furniture, and appliances you don’t already own.
Unsure how much extra you need? Our Upfront costs calculator can do the sums for you.

The deposit you contribute is considered the “equity” you hold in the property (obviously the higher the better).

We know that it can be hard to reach a 10% deposit, and harder to reach 20%. So, we have loan options available from as little as a 5% deposit.

The Loan to Value Ratio (LVR) is the amount of the loan compared to the value of the property. The higher deposit you have, the lower your LVR will be.

LVR is expressed as a percentage. For example, if the home you’d like to buy is valued by the bank at $400,000 and the loan you need to purchase it is $320,000. The LVR is: $320k ÷ $400k = 80% LVR.

The LVR is based on the bank’s valuation of your property (which may differ from the amount you paid on the contract). From a lender’s perspective, the higher the LVR, the higher the cost and risk to the lender, which is why you’ll often see higher rates for higher LVR applications. Apart from getting a better rate, having 80% or lower LVR also means you could avoid paying Lenders’ Mortgage Insurance (LMI).

You may have noticed there are two rates in every home loan ad you see. One of these is the interest rate. This is the percentage of interest that the lender will charge on the balance of your loan per year and is used to determine your minimum monthly repayment.

The other is the comparison rate, which is a tool designed to help you identify the ‘true’ cost of the loan. The reason the comparison rate reflects a loan’s true cost is because it includes the interest rate plus any upfront and ongoing fees and charges.

Under the National Credit Code, banks must advertise both the interest rate and the comparison rate. That’s why you’ll usually find them sitting side-by-side when you’re looking for a loan.

Stamp duty (sometimes called transfer duty) is a tax you pay when buying a property. There are a few factors that determine the amount payable, including the value or purchase price of the property, the State or Territory you’re buying in, and whether you're eligible for any concessions or exemptions.

The First Home Guarantee is a government initiative that provides eligible first home buyers the opportunity to buy or build their first home with a deposit as little as 5%.

Traditionally, home buyers need to save a 20% deposit to avoid paying costly  Lenders' Mortgage Insurance (LMI). For many Australians, saving a 20% deposit is a big barrier to getting onto the property ladder.

Pre-approval is when a lender agrees in principle to provide you with a home loan. It gives you an indication of how much the bank is willing to lend you which can help you establish which properties are within your budget.
Applying for pre-approval is free and you’re under no obligation to take out the loan.

In a competitive property market having pre-approval can help you save time when making an offer. Many sellers and real estate agents also look favourably on buyers with pre-approval as it shows you’re serious about the property.

While you’ll still need to confirm your employment and a few other details to progress to full approval, the difficult paperwork is already done. Pre-approval normally lasts for up to 90 days and you can apply to renew your pre-approval if you haven’t found a property in that time.

Find out more about the benefits of pre-approval.

If your deposit is less than 20% of the property’s value, most financial institutions will require Lenders’ Mortgage Insurance (LMI). LMI is taken out to protect the lender in case of default. It’s a one-off cost and is generally included in the total value of the loan.

‘Subject to finance’ is a standard condition in home purchase contracts. It gives the buyer the ability to back out of the purchase and still get their deposit back if they can’t secure finance with their chosen lender.

The purchase contract is drawn up once you have made an offer on a property and your home loan application is underway. This is also where your solicitor or conveyancer comes in. They’ll explain the terms of the contract and act in your best interest.

A mortgage offset account allows you to use the balance of a linked everyday account to “offset” (or reduce) the balance of your home loan. This in turn reduces the amount of interest you’re charged each month.

If you have some extra savings, adding these funds to an offset account can get your money working harder to help you pay off your home loan sooner.

See how an offset account works.

Fixed interest rate loans

• Give you more certainty and make it easier to budget because you know exactly what your repayments will be for a set period (1, 2, 3 or 5 years).
• Protect you against interest rate rises. However, if interest rates fall, you miss out on the savings.
• If you decide to change banks, sell your home, or pay off your loan within the fixed period, you may be charged an early payout cost.
• Some fixed rate loans let you make additional repayments up to a certain amount – which can help you pay your loan off sooner.

Variable interest rate loans

• Usually give you more features and flexibility, such as the ability to make unlimited extra repayments, or the ability to pay off or move your loan without incurring an early payout cost (although you may pay a discharge fee).
• Are subject to market conditions. If rates fall, it’s likely your variable rate will also fall, and your loan repayments will decrease.
• Similarly, if rates rise, so might your repayments.

Simply apply online, speak to one of our friendly Home Loan Specialists online or visit your nearest branch. You can learn more about the process and what you will need by listening to Episode 7 of our podcast, The Clever Way Home.

Listen to Episode 7: Applying for a loan now.

Your deposit is withdrawn from your nominated bank account on settlement day, along with any other fees and costs associated with the purchase of your home. Your solicitor will confirm the total amount needed.

It’s a good idea to ensure the funds are in your account a few days in advance to avoid delays on settlement day. If you’re unsure of the process, your Home Loan Specialist can answer any questions.

A pre-settlement inspection allows you to check that the property is in the same condition as when you first signed the purchase contract. It takes place in the week leading up to settlement, usually with the agent or seller.

It’s a good idea to review your contract of sale beforehand to ensure any special conditions have been met before settlement day. This is also your chance to do a final check of the hot water service, oven, plumbing, air conditioning and locks are in good working order. Another thing to check is any significant damage to walls, windows, and floor coverings that wasn’t there at the time of the building and pest inspection. If there is damage, or something isn’t working, you can ask for it to be fixed before you move in.

If special conditions haven’t been met, or the property’s condition isn’t as expected, contact your solicitor or conveyancer straight away. They can sort out any problems on your behalf.

The keys can be picked up from the real estate agent or seller (if it’s a private sale) once settlement is complete. You may want to arrange the time and place to pick up your keys beforehand to ensure everything runs smoothly.

At a minimum, you’ll need to have a building insurance policy that begins on your settlement date. Building insurance is a condition of your home loan and it will also protect your investment in extreme events such as a fire.

If you’re buying an apartment or townhouse that’s part of a strata or body corporate, your building insurance will be included in your body corporate fees. In this case you’ll need to supply a copy of the certificate of insurance before settlement day. Your solicitor can supply more information on getting a copy of your certificate of insurance.

Contents insurance protects the possessions that are kept in your home but aren’t attached to the building, such as your furniture, electrical appliances, ovens and small but valuable items like jewellery. You may want to consider getting home and contents insurance to protect both your home and the things in it.

Need insurance? Find out more about home and contents insurance from Great Southern Bank.

There are many clever ways to pay off your home loan faster. One such way is by using our smart tool The Boost. Simply set an amount between $0.01 and $5 to automatically transfer to your home loan account every time you use your Great Southern Bank Debit Card.

Every little bit adds up, and the best part is you’ll be paying off your home loan faster without even realising it.

More ways to own your home sooner.