banking Your Home A guide to buying your first home www.bendigobank.com.au
Your Home A guide to buying your first home At Bendigo Bank we understand that buying your first home is a big step. It s the start of a new chapter with no more rent to pay and the freedom to renovate, hang pictures or pull up the carpet. Your Home A guide to buying your first home is a handy step-by-step guide designed to help you better prepare for the process of buying your first home. Inside you ll find handy hints and information relating to the purchase process, budgeting, mortgages and repayments, additional costs involved and planning your move. Whilst it s a guide only, we hope that once you ve read it you ll be much better informed and ready to meet the challenge of buying your first home. And of course, our qualified lenders are here to discuss your plans and answer any questions you may have about the process. Happy house hunting 1
Borrow with Bendigo Bank and benefit the community you live in When you choose to be a Bendigo Bank customer you not only make a decision that benefits you, you make one that also benefits your community. That s because with every savings or investment account, every home or personal loan, and every product or service we offer, part of our profits go back into our communities to support local projects, groups and organisations. It s not a new thing, it s simply who we are and what we believe in. And it s a simple equation. We believe that Bendigo Bank can only be successful if our customers and our communities are successful first. It means that as a customer you not only benefit from a great range of competitive products and the friendly service we re so well known for, you also get a sense of satisfaction knowing your banking is contributing to your community. 3
Deciding to buy Becoming a homeowner is the dream of many Australians, but we all know that getting into the property market for the first time isn t easy. That s why a plan, good saving habits and realistic expectations are important. Your first home may not be the house you have dreamt of, and it may not be located in your favourite suburb. But that s okay - they don t call it your first home for nothing. The most important thing is to start saving for a deposit. Because the bigger your deposit, the less you need to borrow, the lower your mortgage repayments will be and the more choice you have to find the home you really want. Set a budget No matter which way you look at it, to save for a home deposit you ll need to set a budget. Review the amount of money coming in (your income) and list all your regular expenses. Remember to leave a little extra aside for unexpected costs and the occasional treat. Any money left over at the end of the month could be put aside for your deposit. Bendigo Bank can help you with a savings account with the features you need. As your deposit grows you can then move your savings to a higher interest earning account. Eliminate debt The less money you owe elsewhere, the better position you ll be in for a home loan. Be aware of extra debt such as credit cards, store cards, car loans and personal loans the interest you re paying can add up fast. Talk to Bendigo Bank about consolidating your debt into one loan, or look for a credit card like Bendigo Basic Black, with an everyday low interest rate. Little things add up Simple changes to your spending patterns can mean big savings with minimal impact on your lifestyle. You can save hundreds or even thousands of dollars every year just by packing your lunch, turning off the lights, avoiding takeaway and shopping around for the best price on various products and services. Be realistic Even though some lenders will let you borrow up to 100% of a property s value, it s wise to save as much as you can. Whilst you might get a loan without saving much of a deposit this can put you under pressure when it comes time to make your repayments. Know what you re entitled to As a first home buyer, you may be entitled to a government grant to increase your borrowing capacity. To find out if you are eligible, please visit your relevant State Revenue Office website. Talk to your lender Check your Calculations Budget for the unexpected Even if you ve just started saving, it pays to research the different mortgages available as well as the cost of homes in the area you want to live. Before you start actively looking for your new home, your Bendigo Bank lender can tell you how much you can afford to borrow. You ll need to provide proof of your income and savings history (eg pay slips and bank statements). Bendigo Bank also provides informative online calculators that can help you calculate your loan repayments, future savings when making additional repayments, the estimated stamp duty, plus the benefit of a budget planner and savings estimator for interest bearing accounts. To utilise these calculators (plus many more) please visit www.bendigobank.com.au Before you decide to leap into the property market, make sure you re aware of all the unexpected costs. Don t forget to include home loan application fees, legal fees, mortgage insurance, stamp duty and home and contents insurance when doing your final calculations (refer to page 8 for more details). 14
Location Location Location Look at location first, property second. This means buying with capital growth in mind and avoiding areas that could devalue. Buy in an area that suits your needs and lifestyle (eg Schools, shops, public transport etc). Check out the prices of similar properties in your area so you can spot good value when you see it. Often properties sell for less than the asking price. So if the property isn t selling at auction, always adopt a bargaining frame of mind. Check with the local council, state government and department of main roads on any existing plans for the neighbourhood you re buying into you don t want a highway or supermarket right outside your front door. Remember, it s better to wait for the right property than to rush into something you may regret later. 5
Understanding your loan What is a home loan? In simple terms your home loan is made up of principal and interest. The principal is the amount you borrow and interest is what you pay the bank to borrow the money. At the start of a home loan your repayments largely consist of interest, with a small amount going towards the principal. As you reduce the principal, your interest charges fall until eventually the loan is paid off. A line of credit loan is different. Payments are only required when the balance exceeds the approved limit. How do I get started? The first step is to work out how much you can borrow. At Bendigo Bank we ll base the size of your home loan on your capacity to meet the repayments. Ideally, your repayments should not exceed 30% of your pre-tax income. For a Bendigo home loan you ll need a minimum deposit to help with the purchase of your property. However, the more you can save, the better off you ll be. Your repayments will be lower and you ll save money over the life of your loan. Finding the right loan When it comes to finding a home loan, everyone has different needs. You may feel more comfortable knowing exactly what your repayments will be for the duration of a loan term; or you may like the idea of having the option to increase your loan amount without incurring extra costs for breaking a fixed loan term; or you may wish to have the freedom to make unlimited additional payments during the loan term. Whatever your needs, Bendigo Bank offers that flexibility. With many different loans available including fixed interest, variable interest, interest only and line of credit deciding which is right for you can be one of the hardest things about taking out a home loan. At Bendigo Bank, we have dedicated home loan specialists to ensure you are being provided with the best possible solution for your borrowing needs. The following tips can help you work your way through the maze of information out there. Compare loans The right loan for you will have a combination of features, great service and a competitive interest rate. You can find comparisons on the Bendigo s range of home loans in this booklet or visit www.bendigobank.com.au Don t judge a loan on rate alone The best loan for you may not have the lowest interest rate available. The features and service you get may be more important. For example, the cheapest loans often won t let you make extra payments, and discounted or honeymoon rate loans often have the highest application and ongoing annual fees. Some rates are too good to be true Some honeymoon rates may look appealing but often they ll revert to a much higher standard rate after a few months. The loan with the amazing introductory rate may actually leave you paying more for years afterwards. Make your mortgage work for you At Bendigo Bank, we believe all our customers are important yet all our customers are different. The needs of one customer don t always mirror the needs of another. Therefore, we believe offering different options and benefits is the best way to help make it work for you. Some of the benefits may include: The freedom to make repayments weekly, fortnightly or monthly as well as the option of making additional payments. The option of using Online Redraw at no cost to you. The ability to pay your loan repayments via e-banking, telephone banking, direct debit or in-branch. The opportunity to open a Mortgage Saver Account. This account can be linked to your loan with a full or partial offset saving you interest on your loan repayments. The option of rate regeneration. 6
What type of home loans are available throug h Bendigo Bank? Home Loan Packages At the Bendigo we believe in rewarding people for their loyalty. Bendigo Home Loan Package Plus Be rewarded with a 0.7% p.a. discount off our Residential Variable Home Loan rate when you have a total of $250,000 or more of home lending. Bendigo Home Loan Package Be rewarded with a 0.5% p.a. discount off our Residential Variable Home Loan rate when you have between $50,000 and $249,999 of home lending. Plus enjoy additional benefits on other selected products without incurring an annual package fee. Residential Variable Home Loan Standard Variable Home Loans have an interest rate that can fluctuate over the life of a loan, depending on market conditions. If those conditions see market rates drop, it s likely your home loan repayments will drop too. On the other hand, if market rates increase, your repayments may also increase. Fixed Rate Home Loan With a fixed rate home loan it s easy to budget because you know what your mortgage repayments will be. And if market rates increase, you ll avoid a rate rise potentially saving you thousands. But if they fall, you will miss out on the savings. With a Bendigo Fixed Rate Home Loan you can also make extra repayments of up to 20% of the principal amount during the fixed rate term. Home Equity Loan (sometimes known as a line of credit ) For some people a Home Equity Loan works well. They can be a great way to access the equity in your home and use it for renovations, landscaping, school fees or other purchases. Generation Green Home Loan* Building or buying an energy efficient home is more affordable with Bendigo Bank. With a variable Generation Green Home Loan you ll benefit from a lower interest rate and the added benefit of no monthly fees. Just as they do with a Standard Variable Home Loan, your repayments will fluctuate over the life of your loan. *Must comply with the minimum environmental standard required in your state or territory. Your Bendigo Bank lending specialist can help you choose the best loan for you. They ll help you prepare your finances and ensure you make the most of your loan s extra benefits. 7
The real cost of buying your home Before you leap into the property market for the first time, it pays to make sure you re aware of all the costs. Often the real cost of buying a home is higher than you think. The following list can help you to avoid any unexpected surprises. Home loan application fees At the Bendigo we believe in a user pays fee structure, so you don t end up paying for services you don t need. Loan fees may include an application fee, valuation and solicitor costs, a document preparation fee and settlement fee. Your Bendigo Bank lender will be able to provide an estimate of these costs. Conveyancing You will need to engage a legal representative to review the purchase contract, prepare the transfer and attend to any specific searches on your behalf. Lenders mortgage insurance Depending on the amount of your deposit you may have to pay lender s mortgage insurance. This protects the lender against the costs incurred if you default on your loan. Mortgage insurance doesn t cover the person who borrows the money. Stamp duty Whenever you buy property in Australia you incur a government stamp duty charge based on the purchase price. Registration and title fees Whenever a property changes hands, a Transfer of Land must be lodged with the appropriate state titles office the fee to do this varies from state to state. Lodgement Fees also apply to register these documents in addition to a mortgage (if applicable). Insurance Protecting your big purchase is important and having insurance in place is a condition of your home loan. Your lender will provide you with an insurance quote for your purchase giving you peace of mind that your home is protected. Bendigo Loansure It s important to consider protecting your loan repayments should the unexpected happen. Bendigo Loansure provides peace of mind by offering you the option of protecting your repayments with the following covers: Life Sickness and Accident (Disablement) Involuntary Unemployment Cash Assist (Trauma Cover) Financial Planning Purchasing your first home is a big step and often hits the hip pocket hard. With this change to your financial situation, it s worth sitting down with one of our qualified financial planners to discuss cost effective strategies regarding your future financial goals. It might be advice on paying off your home loan quicker or strategies on how to best use the equity in your property. 8
Building your first home? There may be extra costs to consider Whilst building a home gives you more freedom to choose a layout and design that best suits your needs, there are extra costs that many customers forget to consider when making that decision. Some possible costs to take into account are: Site cut and retaining walls (if you are buying land that isn t level). Fencing. Connections (gas, water, electricity). Soil testing (tests the stability of the soil which then helps determine the type of foundation to use). Bushfire rating (BAL Report). Building plans / drafting costs. Landscaping. Water tanks, shed etc (if required). Costs relating to covenants that are relevant to the land (if applicable). Rental costs incurred during the building process. Don t lose sleep over building your dream home - make sure you have researched all costs involved Tips for paying your loan off sooner Disciplined budgeting from the start can save you thousands in interest and cut years off your home loan. So it s worth considering the following simple strategies. Pay off as much of the principal as you can from the start. Even an extra $25 per week will make a huge difference. Pay loan fees up-front. Stick to a household budget. Pay your tax return or other lump-sum amounts directly onto your mortgage. Open a Mortgage Saver Account. 9
Buying your first home From start to finish 1 2 3 4 5 Research With a budget in mind, research some properties that suit you and your lifestyle. See your lender Make an appointment with your local Bendigo Bank lender to discuss your home loan options. Once an application for a loan is submitted it is assessed by the bank. You will be notified of the results of this assessment, and if required the bank can provide you with a pre-approval. Conveyance Organise a solicitor/legal representative to handle your conveyance during the property purchasing process. Property valuation Once you ve found the home you re after, Bendigo Bank will arrange to have the property valued as security for your home loan if required. Insurance Once finance is approved, it s time to think about protecting your new financial commitment. Is your house protected prior to settlement? How will you be able to pay off the loan should something unexpected happen? Your Bendigo Bank lender can talk to you about different insurance covers that can help give you peace of mind knowing that your property and repayments are protected. Go through the property a few times. If you know a builder, take them along with you to do a building and pest inspection. Your solicitor is there to help and guide you through: The sales process and what s involved. The costs involved. Finer details such as any clauses in your contract of sale. 6 7 8 Plan your move With your finance approved, start planning your move to coincide with the settlement date. Prior to settlement Ensure everything is in order (ie removalists, utilities, address changes etc) and ready for your move. Settlement day Your home loan has settled and you can now move into your new home. Have a disciplined plan in place for paying off your loan. And of course, should you have any questions or concerns about your home loan, your Bendigo Bank lender will be more than happy to help. Keep in contact with your solicitor and lender to ensure everything is on track. 10
Start planning your move now If you have successfully purchased your first house - congratulations! Now all you have to do is move in. Although moving house is often described as one of life s more stressful experiences it doesn t have to be if you start planning early. In advance Select a removalist. It s wise to get several quotes and don t forget to discuss moving insurance with them. If you re renting advise the owner or managing agent, giving the required notice in writing. Arrange to turn on the power, gas, phone and other services at your new address. Don t move the things you don t need or want to your new house. Give unwanted items to goodwill or consider a garage sale. If you re doing your own packing, start well before your moving date. It s wise to number each box and include which room it belongs to. Arrange plenty of boxes, tape, newspaper, bubble wrap and scissors. Pack heavy things in small boxes. Redirect mail with Australia Post and advise relevant companies who send you mail of the change of address. The week before Confirm arrival time with the removalists. Arrange an appointment with your agent for a pre-settlement inspection. Cancel all delivery services, such as newspapers. Arrange a parking permit if required. The day before Defrost the fridge the night before your move and disconnect the washing machine and let it drain. Place important documents and jewellery in a separate box and transport this box yourself. Every family member should pack a bag of personal items, including clean clothes and toiletries. You ll also need toilet paper, a torch, cleaning products, garbage bags and all the documents relating to your move. Charge up your mobile phone. The day of the move Conduct a de-brief with your removalists. Turn off the electricity. Return keys to the landlord or real estate agent. Make sure all the boxes have arrived and nothing is broken. You ll need to make an insurance claim with your removalists if breakages have occurred. Your first job should be to make up the beds. Enjoy the experience and be proud of your achievements! 11
Bendigo Bank has been in the business of helping people buy their first home for more than 150 years. So even though purchasing your first home can be daunting, at Bendigo Bank you ll find a comprehensive range of home loan options, competitive interest rates and all the advice you need to purchase your first home sooner. Your home loan is likely to be the biggest investment decision you ever make. So it pays to look to a trusted financial partner for a home loan that will suit your needs now, and in the future. For more information on Bendigo Bank home loans visit your nearest Bendigo Bank branch. T 1300 BENDIGO (1300 236 344) W www.bendigobank.com.au Bendigo Home Loans are subject to terms and conditions. Fees and charges apply. Bendigo Bank s lending criteria applies. This booklet contains general information only. We encourage you to seek professional advice when buying a home. You should also read the terms and conditions available from any Bendigo Bank branch or online at www.bendigobank.com.au before making any decisions. Bendigo and Adelaide Bank Limited, The Bendigo Centre, Bendigo VIC 3550, ABN 11 068 049 178 AFSL/Australian Credit Licence 237879. BEN50MB226 (S39430) (05/12)