Are you a first-time homebuyer who is interested in purchasing your own property? Congratulations on making one of the biggest financial decisions of your life! As a first-time homebuyer, there are several aspects of the homebuying process that you will need to consider before making a purchase. In this article, we will explore some uncommon terminology to help you better understand the details of buying your first home.
Stamp Duty Threshold
One of the most significant costs associated with buying a property is stamp duty. Stamp duty is a tax that is charged by state and territory governments on the purchase of a property. In Australia, the stamp duty threshold for first home buyers has been reduced to help them get onto the property ladder. Depending on where you live, the reduction could translate into significant savings for you, so make sure to do your research on the stamp duty threshold in your state or territory.
Loan-to-Value Ratio
Another essential term to be aware of when buying your first home is the loan-to-value ratio, or LVR. The LVR is the amount of your loan compared to the value of the property you are purchasing. As a general rule, lenders will be willing to lend up to 80% of the property's value. However, if you have a good credit score, stable income and employment, you may be able to exceed this limit.
Mortgage Insurance
If you are borrowing more than 80% of the property's value, you will be required to pay Lenders Mortgage Insurance (LMI). LMI is insurance that protects the lender in the event that you default on your loan. The premium for LMI can be substantial, but if you don't have a large deposit, it may be your only option to enter the property market.
Conveyancing
When you buy a property, you will need the services of a conveyancer or solicitor to handle the legal aspects of the transaction. Conveyancing involves the transfer of ownership of a property from one person or entity to another. Your conveyancer will ensure that all the legal requirements for buying the property are met and that the transaction runs smoothly.
Pre-approval
Before you begin your search, it's essential to obtain pre-approval from your lender. Pre-approval gives you an indication of how much money you can borrow and the type of property you can afford. When you are pre-approved for a loan, you have a greater chance of securing the property you want, and you can negotiate with the seller with confidence that you can obtain the necessary finance.
Deposit
To secure your first property purchase, you will need to provide a deposit. Your deposit is a percentage of the purchase price that you pay upfront. The deposit is a gesture of good faith to the seller that you are committed to buying the property. Typically, a deposit is around 10% of the purchase price, but this can vary depending on the type of property you are buying and your lender's requirements.
Final Thoughts
Buying your first home is an exciting time, but it can also be stressful and confusing. By understanding the less common terminology associated with purchasing property, you can be more confident and informed regarding your options. Remember to do your research and seek professional advice when it comes to making one of the biggest and most exciting investments of your life.
