(2)    DEPOSITS

SOURCES OF DEPOSITS

The greater the deposit you have on your home loan, the less you will need to repay on your mortgage. Whilst it is possible to purchase a property under a no deposit home loan, it is usually recommended that you do have a deposit or some history of savings.

There are ways you can accumulate the money for your deposit, and these are not just limited to saving the traditional way:

The most common method, is to save up for a deposit the traditional way

• The government's First Home Buyer's Grant of $7,000 can be used
• Inheritance
• Investing in Australian Government projects, which can provide you with an upfront rebate of up to $15,000, and an ongoing payment of approximately $12,000 per annum
• Non-refundable gifts (such as pledges from parents to you)
• Equity from a relatives property (usually your parents)

AMOUNT OF DEPOSIT:

Traditionally, lenders have asked you for a deposit of 20% on a home. Lenders now have a diverse range of options where you can pay no deposit and where some of the purchase fees are rolled into the home loan (effectively meaning you are borrowing 106% of the purchase price). Whilst these types of loans can be attractive, it is important to look at the total picture - repayments, ongoing fees and total cost.

(3)    FIRST HOME OWNERS GRANT

The first home owners grant is a federal government initiative granting first home buyers $7,000 towards the purchase of their first property. In order to be eligible for the first home owners grant, you need to meet the following criteria:

• Your Application must be made within 12 months of the completed construction or settlement of your home
• You or a joint applicant need to be Australian citizens or permanent residents (each state has specific guidelines regarding citizenship by number of applicant and relevant ages)
• You need to be buying or building your first property as an individual / person, not as a company or trust
• You or your spouse must not have previously owned an interest in land in Australia that had a residence on it prior to 1 July 2000
• You or your spouse must not have owned and occupied a home after 1 July 2000
• If you have purchased an investment property (or properties) after 1 July 2000 as long as you have never owned property before 1 July 2000 and have never lived in the investment property
• Neither you or your spouse have claimed the home owners grant previously
• Entering into a building, in the case of owner-builders, must have occurred on or after 1 July 2000
• An eligible home must be located in Australia and be a new or established house, home unit, flat or other type of self-contained fixed dwelling that lawfully can be used as a place of residence
• An eligible home must be occupied by you are your principle place of residence within 12 months of construction of the home. There are minimum periods of occupancy required by each state or territory
• Joint applicants are restricted to a single application for a single property and only one payment of $7000 is made

In addition to the First Home Owners Grant, each state government has additional incentives for home buyers which you may be eligible for. We have included a range of links in our "Tools" section, alternatively, you can try the below links:

(4)    HOME PURCHASE AND HOME LOAN COSTS

 There are a number of lender, government and legal fees you will incur when you apply for a home loan and when you purchase a home. These charges are usually payable in the weeks leading up to the purchase or up until settlement of your loan. It is therefore wise to incorporate these costs into your deposit.

(a) Lender Fees include:

• Loan Application Fees
• Loan Establishment Fees
• Valuation Fees
• Service Fees
• Legal Fees
• Account Transaction Fees
• Exit Fees

There are various factors that may determine some of these costs, for example, the   state you live in, the value of the property, the lender, and the type of loan you choose. It is therefore difficult to state the exact amount you will be paying.

(b) Lender's Mortgage Insurance (LMI)

Earlier, we talked about how much deposit you need when applying for a home loan, and that traditional loans require you to have a 20% deposit. The reason for this is because, if you have less than a 20% deposit, this increases the risk to the lender. In these types of circumstances, you are required to pay Lender's Mortgage Insurance. This is a one-time payment by the borrower/s to insure the lender against any potential default.

(c) Government duty and mortgage registration fees:

Regardless of the lender or home loan product you have chosen, there are standard government state charges that apply, based on the state the purchased property is based in. Depending on the state you've purchased the property in, the fees and amounts will vary:

Stamp duty (payable in all states)

 Some exemptions apply for:

• Victoria (Home buyers with concession cards)
• Western Australia and the Northern Territory (principal residence rebates)
• In instances where you purchase an interstate property, there may be additional charges or proportionate exemptions that apply, depending on the state.

Legal Fees

When purchasing a property, you will usually require the services of a conveyancer or solicitor to administrator all legal processes and documentation transfers.

The conveyancer is responsible for:

• arranging building inspections and pest inspections
• reviewing the contract of sale document and related terms and conditions
• arranging the payment of stamp duties
• finalizing payments such as strata, water rates, land tax, mortgage registration
• finding out any information about the property that may not have been disclosed by the seller
• ensuring final checks are conducted prior to settlement
• attending settlement

The costs of legal services will vary depending on the state requirements, value of the property, any additional complexities the property or purchase may involve. The cost of legal fees usually ranges from $500 to $1500. If you do not have a solicitor or conveyancer, GN Finance or your real estate agent can refer you to one. 

Inspection Reports

Inspection reports include Building and Structural inspections as well as Pest and termite inspections.

Your conveyancer will normally organize a building inspection to be conducted for you. The majority of lenders will conditionally approve your loan with the expectation that an inspection shows the building is structurally sound.  Where you are interested in a property for auction, you need to ensure you finalize building inspection reports prior to the auction. You can expect to pay between $200 and $500 for a building inspection report.

Termite and Pest Inspections are also highly recommended, and may be a requirement for final approval from your lender. This is also something that can be arranged on your behalf by your conveyancer. You can expect to pay between $200 to $400 for a pest and termite inspection.