You’ve saved a deposit.
It might have taken years.
You finally have enough money sitting in the bank to start looking seriously at properties, so you open the real estate apps and work out roughly what you think you can afford.
But having a deposit and having enough money to complete a property purchase aren’t necessarily the same thing.
There can be other costs to allow for, and how much cash you need can depend on the property, your circumstances and the home loan structure available to you.
For first-home buyers in Maitland, it’s worth understanding the complete purchasing position before you fall in love with a property and make an offer.
Your Deposit Is Only One Part of the Purchase
Suppose you’ve saved $60,000.
The first instinct can be to treat all $60,000 as the deposit.
But the property transaction may involve other costs that also need to be paid.
Depending on your circumstances and the purchase, these could include:
conveyancing or legal costs
building and pest inspections
lender or loan-related costs
valuation costs where applicable
government charges
adjustments at settlement
moving costs
insurance
immediate property expenses
There may also be stamp duty or transfer duty considerations, although eligible first-home buyers may qualify for concessions or exemptions depending on the applicable rules.
The point is simple: don’t commit every available dollar to the deposit before understanding what else needs to be paid.
Start With the Cash You Actually Have Available
When someone tells me:
“I’ve got a $70,000 deposit.”
I want to understand what that means.
Is $70,000 the entire amount saved?
Or is there $70,000 specifically available for the property deposit after allowing for purchasing costs and an emergency buffer?
Those are different positions.
Write down the total amount you genuinely have available for the purchase.
Then separate it into:
deposit
purchase costs
cash you want to retain after settlement
That gives you a much clearer starting point.
You Don’t Necessarily Need a 20% Deposit
The idea that every home buyer must save 20% of the property price before applying for a home loan isn’t correct.
Depending on the borrower, lender, property and available schemes or lending structures, purchasing with a smaller deposit may be possible.
However, borrowing a higher proportion of the property’s value can affect lender options, costs and assessment.
Lenders Mortgage Insurance, often called LMI, may also apply in some higher loan-to-value situations.
There can also be government-backed first-home buyer initiatives for eligible borrowers.
The important point is not to assume either:
“I need 20%, so I can’t buy yet.”
or
“I’ve got 5%, so I’m definitely ready.”
Your actual position needs to be assessed.
What Is Lenders Mortgage Insurance?
LMI is commonly misunderstood.
It generally protects the lender, not the borrower, if the borrower defaults and the lender suffers a loss after enforcing its security.
Depending on the loan and lender, LMI can represent a significant cost when borrowing a high percentage of a property’s value.
In some circumstances it may be capitalised into the loan, subject to lender requirements and maximum lending limits.
Whether paying LMI makes sense is a personal financial decision.
Some buyers prefer to wait and build a larger deposit.
Others may decide that purchasing earlier is worth considering.
The numbers need to be compared in the context of your circumstances.
What About First-Home Buyer Schemes?
Eligible first-home buyers may have access to government initiatives designed to reduce some of the barriers to purchasing.
These schemes can change over time and have their own eligibility requirements, property limits and conditions.
That’s why I don’t want a first-home buyer relying on something they saw in an old article, social-media post or conversation with a friend.
If a government scheme is important to your purchasing strategy, check the current rules applicable at the time you’re preparing to buy.
We can also look at whether the home-loan options you’re considering interact with an applicable scheme.
Borrowing Capacity and Purchase Budget Aren’t the Same Thing
This distinction is important.
A lender might assess that you’re capable of borrowing a particular amount.
That doesn’t automatically mean you should spend up to the maximum possible property price.
Your own budget still matters.
Think about the mortgage repayment alongside:
council rates
utilities
insurance
strata costs where applicable
maintenance
commuting costs
other debts
ordinary living expenses
The lender is assessing whether the application meets its criteria.
You’re deciding whether you actually want to live with the financial commitment.
Those are related decisions, but they aren’t identical.
Your Home Loan Repayment Isn’t Your Only Housing Cost
Rent can make housing costs feel relatively predictable.
Home ownership introduces expenses that aren’t included in the mortgage repayment.
If the hot-water system fails, there’s no landlord to call.
If the roof needs work, it’s your roof.
If you purchase in a strata scheme, there may be regular levies and potentially special levies.
If you buy a house with a large yard, pool or older infrastructure, maintenance costs can be different again.
When deciding what mortgage repayment feels comfortable, leave room for actually owning the property.
Don’t Spend Every Dollar at Settlement
This is something I want first-home buyers to think about carefully.
Imagine you have $85,000 available and could structure the purchase so virtually all of it goes into the transaction.
You settle with $500 left in the bank.
Then the fridge dies.
The car needs repairs.
An insurance bill arrives.
Or you discover something in the house needs attention immediately.
Owning a home with no cash buffer can feel very different from having savings available.
There isn’t one correct amount everybody should retain.
But having enough to settle isn’t necessarily the same as being financially comfortable after settlement.
What If Your Parents Can Help?
Family assistance can take different forms.
Parents might provide a genuine financial gift towards the purchase.
In some circumstances, a guarantor structure may also be considered, depending on the lender and family circumstances.
Those are very different arrangements.
A guarantor is taking on a significant financial commitment and should understand the risks involved. Independent legal advice may also be required.
Don’t assume parental assistance automatically means transferring money into your account a week before application.
Tell us how the family is proposing to help so we can look at the structure properly.
Be Careful Moving Money Around Before You Apply
If your deposit has been built from savings, a gift, sale proceeds or other sources, keep clear records.
Large unexplained transfers can create questions during an application.
If family is contributing, document it appropriately.
If you’ve sold an asset, retain evidence.
If money is moving between your own accounts, make sure the trail is understandable.
A home-loan application involves verifying financial information.
Making the source of the purchase funds easy to understand can save unnecessary confusion later.
Should You Get Finance Sorted Before Looking at Houses?
You don’t need to know the exact property before starting the finance conversation.
In fact, there can be significant value in understanding your position first.
Before spending every Saturday at open homes, find out:
approximately what you may be able to borrow
how much cash you may need
what repayments could look like
whether there are issues that need to be addressed
whether an applicable first-home buyer initiative may be relevant
That gives you a more realistic property search.
It can also prevent you from spending weeks looking at homes outside a sensible budget.
Pre-Approval Isn’t the Same as Final Approval
A pre-approval can help establish an indicative borrowing position, but it isn’t a guarantee that any property you subsequently choose will automatically receive final approval.
The lender may still need to assess the property and confirm other requirements.
Your circumstances also need to remain acceptable.
If you change jobs, take on new debt, increase credit-card limits or materially change your financial position after receiving a pre-approval, tell your broker.
Don’t assume nothing matters until settlement.
Be Careful Making an Unconditional Offer
Property purchasing rules and contract practices can vary, and the consequences of signing an unconditional contract can be significant.
If your purchase depends on finance, understand the contract before committing.
Your conveyancer or solicitor should advise you about the legal terms and risks associated with the purchase contract.
A finance pre-approval doesn’t replace legal advice and doesn’t automatically make every property acceptable to a lender.
The Property Itself Matters to the Lender
Home-loan approval isn’t based solely on the borrower.
The property is generally the lender’s security, so characteristics of the property can affect lending.
Certain property types, sizes, locations or features may be treated differently between lenders.
This is another reason not to assume that because you can potentially borrow a certain amount, every property at that price will automatically fit.
If you’re considering something unusual, tell us before committing where possible.
What Should You Do Before Your First Serious Open Home?
Know these numbers:
Your total savings.
How much of those savings you’re comfortable using.
The approximate loan amount you’re considering.
The repayment you’re comfortable carrying.
The additional purchase costs you need to allow for.
The amount you’d like left in the bank afterwards.
You don’t need perfect numbers at the beginning.
But having a framework makes the property search much more deliberate.
First-Home Buyer Finance in Maitland
Buying your first home around Maitland is a much bigger decision than finding a property you like and working out whether you’ve saved 10% or 20%.
You need to understand the loan, the cash contribution, purchasing costs, ongoing ownership costs and what your financial position looks like after settlement.
That’s the part that can get lost when all the attention goes onto the deposit.
Thinking About Buying Your First Home?
Before you start making offers, contact Thrive Broking and tell us your approximate savings, income, existing debts and the property price range you’re considering.
We can look at your home-loan position and help you understand what information will be required, what funding options may be available and how much cash you may need to complete the purchase.
The goal isn’t simply to get you through settlement. It’s to understand the numbers before you commit to the property.