What You Need To Know Before Buying Your First Home
Buying your first property is an exciting milestone.
But before you get to the settlement day, there’s a lot of things you need to do. Thanks to our guide for first home buyers, there’s no need to be overwhelmed. Here’s what you need to know before buying your first home in Toowoomba.
First Home Owners Grant in Queensland
The First Home Owners Grant (FHOG) is a one-off payment to help towards the cost of your first home. The amount of the grant depends on when your home’s sale contract is dated:
- $15,000 if your contract is dated after July 2018, or between October 2012 and June 2016
- $20,000 if your contract is dated between 1 July 2016 and 30 June 2018
To be eligible for a FHOG, you must be buying a brand-new home valued at less than $750,000, or building a new property where the land and house construction are under $750,000. It’s also possible to buy a property that has been “substantially renovated”, meaning all or most of the non-structural parts of the building are replaced, but this isn’t all that common. Toowoomba is an excellent place for new buyers to enter the market, as it’s quite common for new homes to sell for around $500,000, meaning the FHOG is in reach for many first homeowners.
As well as requirements for the property itself, you and your co-purchasers also have to meet a set of eligibility criteria, including:
- One of you must be an Australian citizen or permanent resident, or a New Zealand citizen with a special category visa
- None of you can have owned property in Australia that you’ve also lived in (there are exceptions if you bought and rented out an investment property, but you have to have proof)
- Never having received a FHOG anywhere in Australia
- Never having owned a home before 1 July 2000
- You must live in the home as your main residence for at least six months, starting at any point in the year after settlement
You can apply for the FHOG through your lender or directly with the Office of State Revenue. If approved, it’ll be paid at settlement, or at the first drawdown of funds for new builds.
Stamp duty exemption and concessions
Similar to the FHOG, you might be eligible for a concession on stamp duty (now known as transfer duty) when buying your first home if the property is valued under $550,000. If your property is less than $500,000, you’re exempt from stamp duty as a first home buyer, while properties valued between $500,000 and $550,000 come with a reduced rate of duty.
With a median house price of $370,000 in Toowoomba City, most first home buyers are able to buy their dream properties completely free of stamp duty.
To be eligible for the first home concession, you:
- Mustn’t have claimed the first home vacant land concession before
- Can’t have held in interest in a residential property in any country
- Must be at least 18
- Must live in the property within the first year after settlement
- Can’t dispose of (by selling, transferring, leasing, etc) any of the property before moving in
- Pay market value if it’s valued between $500,001 and $549,999
If you’re building your first property, you can apply for a first home vacant land concession on transfer duty. It’s available on land up to $400,000 and can save you up to $7,175.
How much you need for a home deposit
The question about the right deposit amount is a common one from new buyers, but there’s not necessarily an exact answer. In the past, it was possible to get a loan for 100% of the mortgage amount, but now you usually need a deposit of at least 5% for most lenders. To get this 95% loan, you’ll typically need a strong employment and financial history.
Deposits of between 10% and 20% are very common, but take note that a deposit less than 20% means you might have to pay Lender’s Mortgage Insurance (LMI). This is because you’ll have a loan-to-value ratio (LVR) or more than 80%, so you’re seen as a bigger risk to lenders.
How much you pay for LMI varies based on your financial situation and the property, so check with your lender. If you don’t have a 20% deposit the LMI amount will usually be added to your loan repayments.
Pest and building inspections
Before committing to such a significant purchase, it’s a good idea to get the property inspected for building and pest issues. It usually costs a few hundred dollars and gives you the peace of mind that you’re making a good financial investment, or gives you the opportunity to walk away or negotiate on price.
If you’re buying your home at auction, the inspections need to be done beforehand. If buying the property privately, you can do it in the cooling-off period, but it might be too late to negotiate if issues crop up. Organising the inspections before committing to the sale is the safest bet.
Conveyancing, legal and other fees
Using a professional conveyancer or solicitor is essential in effectively dealing with the legal aspects of buying a home, so check in with your agent or trusted friend for a recommendation. Qualified conveyancers can prepare the legal documents and give advice, while a solicitor can give other types of legal advice too, making their fees more expensive. You can choose either for your property sale, depending on your needs and budget.
Buying your first home in Toowoomba?
Get in touch with our team for advice today.