Building your first home is probably the biggest decision you will ever make. The first home buyer’s grant has been a blessing for young Australians to fulfil a dream of their build home. But stakes can be high if you decide to jump into the market without the discipline of saving and having a financial buffer.
Step one in financing your first home should be to arrange provisional finance and get expert advice before entering into a contract for first home construction. Buyers need to be aware of their financial limits and commitments during the construction period and the following completion.
It is worth bearing in mind that many lenders in Australia are reluctant to provide finance to owner-builders. And loans are usually restricted to the construction period. Renters also have it tough, find out how you can make it work as a renter.
Based on advice from experienced industry leaders, here are some important points to avoid common financial traps when building your first home:
- Work out how much you can afford to spend before you even look. Always check with home consultants what are the potential costs that may be added to the base price of your house design.
- Do not waste your energy looking in the wrong suburb – because you may end up biting off more than you can chew.
- Look at as many house plans as possible in your price range to get an idea of what you can afford. Check with experienced mortgage advisers to work out what loan product suits your needs – especially your borrowing limit!
- When working out the best home loan for you, check the ongoing payments, especially in the fine print for monthly service fees and other charges.
- If you are worried about interest rate rises, you can split your loan between variable and fixed rates and take an “each way” bet.
- Make fortnightly payments, not monthly, so the interest on your mortgage does not add up.
- Remember a low start-up interest rate or honeymoon rate loan does not mean you will be paying less for your property in the long term.
- Make sure your home loan repayments do not overly impact on your lifestyle. You do not want to only eat baked beans for dinner for the next 25 years.
- Be prepared for the monthly repayments to rise and fall during the life of your loan. Make sure there is some financial room to move if rates rise. If rates fall, keep paying the same amount each month or fortnight. You’ll pay off your loan quicker by eating into the principal owing.
- The best step you can take in the search for your first build home is to get pre-approval for a loan, which Aussie and some other lenders can provide, so you know exactly what you can afford.
Having trouble understanding how to finance? Download our FREE guide today to get a comprehensive overview of what you should expect and prepare for.
Related Articles:
Our Tips for Planning Your Display Village Visits
Pros and Cons of House & Land Packages
The Best Time to Build a New Home
Let us do the legwork for you.
- We’ll ask the right questions to better understand your needs
- We’ll create a recommended shortlist ideally matched to you
- We’ll answer specific questions or concerns related to home building, land purchasing or financing
Zoe Langenberg
Zoe is passionate about coffee and interior design. You can find her most weekends exploring an art gallery or devouring a good book.
1800 184 284
