You may already have a home you love in mind, but there are a few steps to consider before signing on the dotted line. Here are five things that could help you organise and understand your finances. 

1. Calculate your current cost of living to determine your budget

Before you start house hunting, it's important to know how much you can afford to spend. After all, you don't want to spend time falling in love with a home you may not be able to afford. If you're planning on using a home loan to buy a property, start considering these questions: 

• How much can I save for a deposit?
  
• What is my timeframe to purchase a home?
• How much of a mortgage payment can I comfortably make every month?

Whether you are buying a home on your own or with somebody else, the answers to these questions are different for everybody. Still, it's good to consider things such as your:

– household income

– basic weekly expenses

– expenses you're not willing to cut because they support your well-being 

– future expenses, such as school fees

– monthly debt repayments, if any

– current savings you're ready to put towards your deposit, stamp duty and other buying costs

– other things you're saving for and that are important to you.

2. Work out how much you could borrow for a home loan

Once you figure out your budget, you should have more clarity about your financial position. This can help you determine the amount you could borrow.

These seven financial factors could influence your borrowing capacity:

– income

– financial commitments

– living expenses

– savings

– loan period

– property value

– credit history.  

Remember: when you sign a home loan, you're in for the long haul, with terms of up to 30 years. While you can't predict the future, think ahead. Are you planning to grow your family? Move overseas? Start your own business? 

Your expenses can change as life happens. 

Need help figuring out how to start? To get a quick estimate of your price range, consider using our Borrowing Limit Home Loan Calculator .

3. Understand other upfront buying costs

When we think about the upfront costs of buying a house, the deposit usually is the first thing that comes to mind. However, there may be other costs, you'll need to consider.

Mortgage registration

Mortgage registration is the fee every state or territory charge to register the mortgage against the property as the security for the home loan. 

Transfer fees

This is the amount each state and territory charges to transfer the property title from one person to another. The fees change from state to state.  The fees are payable by the purchaser of the property.

Conveyancing

Transferring the legal ownership of your new home (conveyancing) involves paperwork and legal considerations. It could be handy to engage a conveyancer or solicitor to help you navigate these waters.

Inspections

Inspections could help ensure your dream house doesn’t turn out to be a nightmare. Hiring professionals for building and pest inspections are crucial before making a final offer on a property.

Buyer’s agent fees

If you're buying, a buyer’s agent can help you find the right property and assist you during negotiation. Hiring a buyer's agent is up to you, but if you’re new to home buying, they could help you make decisions with confidence.

Stamp duty

Stamp duty is a state government tax that is paid by buyers of certain purchases, including property and land purchases. The exact amount of stamp duty and any other fees will vary based on the state or territory in which you’re purchasing the land or property and whether the property is being purchased to live in or as an investment. 

To get a general sense of the costs of stamp duty and government fees in your state or territory, consider using our Stamp Duty Calculator . 

4. Calculate how much you could afford in home loan repayments

The answer could be another question: How much money do you want to have for living expenses, savings and other things that matter to you or your family after your repayments? Yes, we're talking about that holiday overseas you've been dreaming about or your daily coffee at your most loved cafe.

Every person's situation is different and it’s important to seek some professional advice if you need some help.

You will also want to consider giving yourself some wiggle room for possible interest rate changes.

Once you've figured out your living expenses, estimated how much you might be able to borrow and upfront buying costs, and decided on your or your family's non-negotiables, consider using our Home Loan Repayment Calculator to get an estimate of what your home loan repayments could be. 

5. Figure out how much you need for a house deposit

For most of us, saving thousands for a home deposit is challenging. But it can be helpful to keep track of your budget and learn how you could be getting more from your savings.

The deposit you need depends mainly on the price of the property you want to buy. Generally, banks and financial institutions will recommend you have a deposit of at least 20 per cent of your prospective property's purchase price. But every person's home loan situation is different. It might be possible to get a loan with a smaller deposit. 

What are LVR and LMI? 

LVR stands for Loan Value Ratio, and lenders use it to assess the risk of a loan. 

Meet Anna and Lach. They want to buy a $500,000 house. After looking at their household income, savings, purchasing costs, and other expenses, they have decided to borrow $400,000. 

In this scenario, Anna and Lach's LVR would be 80 per cent since their loan would be 80 per cent of the property's value. 

In some cases, it might be possible to obtain a home loan with a smaller deposit. 

If you have less than a 20 per cent deposit, Lenders Mortgage Insurance (LMI) will apply to your home loan. This is a one-time payment that you pay, which protects the bank if you’re unable to make your repayments. Lenders add the LMI cost to your mortgage principal for you to pay off over time.  

In a nutshell, people's situations are different, but the larger your deposit, the less you need to borrow. 

Get assistance

Now you know some of the factors to consider when organising your finances before buying a home. The good news is you aren't alone. 

Talk to a Suncorp Bank home loan expert for questions about home loan and assistance with your application.

Chat with a home loan expert

Published 5 July 2023