Well, what have we got here? A budding first homeowner by the looks of it. Congratulations, you’re one step closer to not having to label your own food in fear of your dodgy housemate scoffing it all. But before we get ahead of ourselves let’s talk first home logistics.
The whole process when you’re the new kid on the buying block can be overwhelming. Like where do I start? Do I need a lawyer? What’s LMI? Can someone explain stamp duty? When should I get pre-approval and from who? Lordy, my head already hurts. Thankfully, we’ve got Andrew Bartolo – ME Bank’s General Manager of Home Loans – on the phone to sort this bizness out for us.
1. I want to buy a house (yeewww!) but what’s the first, second and third thing I should do?
According to Bartolo, buying a home is more than just hitting up an auction, raising your hand and getting the keys. First thing’s first, you gotta get your finances in order and save a lump sum deposit.
“Get a rough estimate of how much you need for a deposit and related costs, calculate your regular home loan repayments, and then build a strong savings history by showing you can meet those repayments without overspending,” he says.
“Next you can start determining your borrowing limit. How much you can borrow is important – it will shape where and what you can afford to buy. Our Borrowing Calculator can give you an idea of how much you can afford to borrow but there’s no substitute for speaking with your ME Mobile Banker,” he continued.
Then, you’ll want to draw up your dream (but realistic!) home and start getting a feel for what’s on the market. Like, do you want a big backyard? In that case, the city probably isn’t for you. Hit up a bunch of inspections and start narrowing down any potential properties.
Only once you’ve ticked these three steps off should you start looking at things like home loan pre-approval. Slow and steady buys you that dream house, gang.
2. Is paying for LMI worth it or is it better to save for a 20% deposit?
What the actual hell is LMI and do I want it? Lenders Mortgage Insurance is a not-so-little add-on if you’ve borrowed more than 80% of your home’s value, AKA, you have a deposit of less than 20%. Basically, it protects the lender. Not you. Sorry to be a bummer. LMI is there to cover their losses if you can’t make repayments, which is also known as a ‘default’ on the home loan.
According to Bartolo, it’s normally best to save the largest deposit amount possible – at least 20% if you can manage.” Why? Because that lump sum is not only money you won’t have to pay interest on later but it also lowers your chance of having to pay LMI at all.
3. Can someone explain maximising interest to help me save? Because please sir, I want some more
In good news for little Olivers everywhere, there are definitely a bunch of ways to maximise interest. Like, online savings accounts can sometimes offer a higher interest rate than everyday accounts. So shopping around is always a good idea.
That said, Bartolo reckons a strong savings plan is often better for your piggy bank than the interest you can earn. After all, #COVID has our interest rates super low at the moment. He recommends making changes like downgrading to a cheaper rental, swapping your gas guzzler for a more affordable ride and making the most of your tax deductions.
“Remember to pace yourself, too. Eating soggy cereal every day instead of smashed avo is a sure-fire way to burn out. If you’re not enjoying yourself, you may end up resenting your savings plan and not sticking to it at all,” he says.
Preach. I’m here for moderation AND a decent looking savings account. As I’m sure you are, too. For more helpful information, contact a ME Mobile Banker.Image: Home Alone