Top 4 traps to avoid for first home buyers

Last updated on June 9th, 2023
  Written by 
Bill Tsouvalas
Bill Tsouvalas is the managing director and a key company spokesperson at Savvy. As a personal finance expert, he often shares his insights on a range of topics, being featured on leading news outlets including News Corp publications such as the Daily Telegraph and Herald Sun, Fairfax Media publications such as the Australian Financial Review, the Seven Network and more. Bill has over 15 years of experience working in the finance industry and founded Savvy in 2010 with a vision to provide affordable and accessible finance options to all Australians. He has built Savvy from a small asset finance brokerage into a financial comparison website which now attracts close to 2 million Aussies per year and was included in the BRW’s Fast 100 in 2015 as one of the fastest-growing companies in the country. He’s passionate about helping Australians make financially savvy decisions and reviews content across the brand to ensure its accuracy. You can follow Bill on LinkedIn.
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As expected, there are some traps people should avoid at all costs when it comes to buying a new house. Keep on reading the article to get acquainted with a number of precaution measures so that your moving experience won’t be shadowed by negative happenings. Borrowing more money than you actually need.

The lender will carefully investigate your financial situation and he/she will provide you with an estimation of your income. Your liabilities and assets will be taken into account in order to calculate the maximum amount of money you ought to borrow.

Nonetheless, first home buyers can be tricked into borrowing more money than they actually need. This means paying large sums on interest for a long period of time. This will imminently lead to coping with restrained budged and limited financial possibilities.

Not saving a sufficient deposit

A small deposit could place you in the category of high-risk borrowers and this will eventually determine the lenders to make extra efforts in attempt to create a safety net for your situation. Thus, you might end up paying a higher interest rate, additional charges and additional fees, as well as a lender’s mortgage insurance.

In this direction, you ought to make sure to save a larger amount of money before applying for a mortgage loan. This way, you will have a wide range of loans and lenders to choose from. Not to mention that you could completely reduce the mortgage insurance – this is a significant aspect.

Overspending with renovations

Inexperienced first home buyers might invest a large amount of money in renovating their dream home. Because of the whole excitement related to owning a first home, not undergoing proper research required in order to get acquainted with the range of prices related to home renovation costs leads to overspending. Thus, this reckless spending imminently leads to dealing with money problems in the future.

Not organising a building inspection

Bear in mind that before proceeding with purchasing the new house, it is mandatory to organize a pest and a building inspection. This way, you will be able to know its exact state and you won’t witness any negative surprises after moving in.

Organizing an inspection can help you negotiate the price of the house. Thus, if the authorized inspection reveals a couple of serious problems such as the existence of mould or termites, you may use this information in order to negotiate the asked price, and in this way obtain a more profitable offer.

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This guide provides general information and does not consider your individual needs, finances or objectives. We do not make any recommendation or suggestion about which product is best for you based on your specific situation and we do not compare all companies in the market, or all products offered by all companies. It’s always important to consider whether professional financial, legal or taxation advice is appropriate for you before choosing or purchasing a financial product.

The content on our website is produced by experts in the field of finance and reviewed as part of our editorial guidelines. We endeavour to keep all information across our site updated with accurate information.

Approval for home loans is always subject to our lender’s terms, conditions and qualification criteria. Lenders will undertake a credit check in line with responsible lending obligations to help determine whether you’re in a position to take on the loan you’re applying for.

The interest rate, comparison rate, fees and monthly repayments will depend on factors specific to your profile, such as your financial situation, as well as others, such as the loan’s size and your chosen repayment term. Costs such as broker fees, redraw fees or early repayment fees, and cost savings such as fee waivers, aren’t included in the comparison rate but may influence the cost of the loan. Different terms, fees or other loan amounts may result in a different comparison rate.

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