How We Bought Our First Home!

Have you dreamed of owning your first home?

A place to to make your own, without parents or in-laws on top of you all the time. Or without having to worry about rental inspections, having to move every two to three years and landlords who just won’t fix that damn fence.

Having your own home does come with a whole heap of perks, especially if you are a young family or starting to think about beginning your own family.

However, Australia’s housing market is extremely difficult to get into, buying your first home for many is a milestone that is almost impossible.

But, for those who are persistent, for those who are working hard towards a Dream of Buying that First Home, no matter what, it is still possible.

First thing my wife and I did when we bought our first home was talk to family and friends, unfortunately during that time, there were not too many people who could give us advice.

Most of our friends had not bought their first home, and family members who had bought their first home, bought nearly twenty years ago or more!

Unfortunately, twenty years ago does not even begin to relate to the most recent times. Therefore, with not a lot of help, we turned to reading (I am an avid reader) and enlisted the help of a professional mortgage broker.

After reading a few personal finance books, one of which was Scott Pape’s “Barefoot Investor’s- The only Money Guide You Will Ever Need,” (Great initial reading to get the ball rolling) we realised that we needed to build up a deposit.

We then talked to a mortgage broker who was able to go through our financial situation and give us a ball park figure to aim for a good deposit, which was roughly around $80,000 at the time for a $500,000 house and land package. (We had around an $18,000 deposit saved up at this time)

We didn’t have anywhere near this figure at the time, and this was below the 20% deposit that the “Barefoot Investor” suggested, but we knew that we just wanted to get into our first home and didn’t care too much for the Lenders Mortgage Insurance (LMI)[1].

[Lenders mortgage insurance is the insurance a bank will take out, and make you pay for, if you have less than a 20% deposit. In case your property decreases in value and you need to sell due to defaulting, the bank will not lose money.]

So these are the steps we took to buying our first home:

1. Read about personal finance and build a budget (Work more to earn more and reduce expenses where possible, SACRIFICE is necessary)

2. Research the areas/locations that you want to buy in, you need to decide this before you know how much you will need to spend for your first home.

3. Engage a Mortgage Broker, one who is experienced in helping first home owners! Build a plan to get that deposit (Need to have a final figure for your home before engaging in this step).

4. Be Patient and review your financial situation once a month. Keep looking on Realestate.com and Domain, but don’t get caught up in wanting anything until you are close to your deposit goal.

5. Be DISCIPLINED- Pay yourself first (ie; Transfer your savings into a separate savings account, one that you cannot touch.

Being young, a little naïve and not having any experience at all did end up working in our favour though, as we decided that we were going to build a deposit and buy our first home within twelve months. If you know my wife and I, we are extremely stubborn and once we make our minds up about something, we work hard to make it happen. If we were older, had more experience and knew how much we would have to sacrifice, it may have been a bit different. But above all else, we wanted to buy our first home and take the first step in making our lives our own.

In late 2017, we built our budget and started saving like crazy, putting away 60-70% of our wages into savings, it helped that we were living with our parents at the time, especially considering we were earning less than $90,000 before tax between the two of us.

We started working more, and took on extra jobs, any way in which we could earn a little bit more to build our deposit faster.

During this time, there are a lot of emotions, especially if you feel stuck in your parent’s house, like my wife did. Emotions start running a little bit higher, the closer you get to your goal, the feeling that you will achieve your goal soon will actually make your decision making process less realistic. Not to mention more arguments/frustrated tension between family members or roommates.

Hence why it is important to have your plan and budget that you need to be disciplined enough to stick to.

How did our first home buying story end? Well, by mid-2018, we took the plunge and signed on a house and land package contract. (Against the advice of our mortgage broker at the time.)

Our very first home - Moved in Oct - 2019 (Sold early 2022)

Which was a story in itself, as we went through a whole heap of problems throughout the build and learnt a lot about the building process. The main learning was you buy land, you do not need to go with a builder that has their name on that land. No matter what the sales person says to you, you are buying the land and not the builder!

We haven’t been deterred by our horrible first building experience though, as we are now building our second home, having bought land late in 2021. (Either that, or we didn’t learn from the first time LOL)

But we can leave that story for another time, as there are just a few more things you need to know before I leave you to start DREAMING about your first home…

As mentioned above, we were pretty young and very naïve when we decided to buy our first home, so here are the things we wish we knew before we started planning our very first home!

• First Home Owner Grant - $10,000 contribution from the government for a first home owner (New home or build up to $750,000) [2]

• First Home Super Saver Scheme - Can put up to $15,000 of contributions per FY and Save up to $50,000 in your Super Fund (Saving on tax and potentially getting better returns than a savings account.) **Talk to a professional Financial Adviser before deciding on this strategy.

• First Home Buyer Guarantee - The government will insure up to 15% of the home value, so you only need a 5% deposit [4]

• Stamp Duty Exemption or Concessions - Pay $0 on stamp duty for first homes valued up to $600,000 or get a concession for between $600,001-$750,000

There are plenty of incentives to buying your first home and a heap of different strategies to help you to build/buy your dream first home…

**Please see all links to government sources below for more information!

Therefore, you should speak with a professional, such as a mortgage broker or financial adviser who may be able to help you get a great understanding of your personal situation and circumstances. As everyone is very different and there are multiple ways in which you can build your deposit to buying your first home.

Hence, why should enlist the help of a professional whenever you can, and you can meet with a mortgage broker or even an adviser free of charge in the first meeting most of the time. Whom will be happy to give you a few hints and tips to help you along the way to owning your first home!

Buying your first home can be daunting and can be something that seems impossible, but it does not have to be. You just have to know what you want, and go out and work for it. Truly, that is what it takes if you want to finally get into your first home, and it doesn’t sound all that difficult, but it does require discipline and an ability to sometimes say ‘NO’ to friends or family.

To Sacrifice a little bit now, for something good in the future!

For now, go and do some research on where you want to live, read some personal finance articles or books and start building out your plan to BUYING YOUR FIRST HOME!

Until next time,

Take Back Control

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[1] - Lenders Mortgage Insurance - https://insurancecouncil.com.au/articles/lenders-mortgage-insurance/

[2] - FHOG - https://www.sro.vic.gov.au/first-home-owner

[3] - FHSSS - https://www.ato.gov.au/individuals/super/withdrawing-and-using-your-super/first-home-super-saver-scheme/

[4] - FHBG - https://www.nhfic.gov.au/support-buy-home/first-home-guarantee

[5] - Stamp Duty Exemption or Concession - https://www.sro.vic.gov.au/fhbduty