How to Buy a House in Australia

Buying a home is one of the most important financial decisions you will make in your life. This process can be extremely rewarding once it’s complete, but it can also be complicated and very expensive. This article breaks down the steps along the way and how you can be better prepared for buying a house.


    Assessing your circumstances

    Before you can begin the process, you need to take stock of your current and future finances, as well as personal and professional goals. This will help you figure out how much you’ll be able to borrow.

    Economic means and prospects

    Lenders will be looking for signs that you are financially stable and dependable.

    • Savings: Having some funds in reserve shows that you can plan ahead and that you can weather financial uncertainty, proving you’re ready for buying a house.

    • Job security: Being with the same employer for at least a year demonstrates that you have a source of reliable income and will make your payments.

    • Credit history: Maintaining a strong credit score shows that you can responsibly handle debt, since lenders are wary of granting home loans to customers with bad credit.

    Demographic-based opportunities

    You might be eligible for extra grants or loan benefits without even knowing about it.

    • Professional packages: Some occupational fields are viewed favorably by lenders and receive extra incentives. These include traditionally stable roles like accountants and medical professionals.

    • Parent-to-be borrowers: Many lenders look for ways to be supportive of growing families looking to put down roots with a home purchase. Each dependent could lower your loan amount by as much as $50,000.

    • First-time home buyers grant: Those buying a first home enjoy special benefits like the First Home Owner Grant. These government programs make it easier to escape the rent cycle and become a homeowner.

    After learning what opportunities are available to you as a borrower, it’s time to do some housing market research. Determine what kind of property you want to buy, the area you want to live in, whether you prefer a newly-built home or an old one requiring some home renovations. All of this helps you understand what kind of property you can afford.

    Preparing for extra costs of buying a house

    Beyond your deposit, you must also be ready for additional fees and charges. When you buy your first home, you may not realize how much actually goes into the process. These are the most common expenses that crop up when buying a house:

    • Lenders Mortgage Insurance

      If your deposit is less than 20% of the home’s price, many lenders require Lenders Mortgage Insurance since a lower deposit makes the loan more risky.

    • Stamp duty

      Government tax will vary by state, and can become sizable depending on the purchase price. Some states have certain waivers.

    • Legal and conveyancing fees

      Since buying a house can involve complex legal procedures, you will need legal experts to review the documents involved. These fees can climb as high as $1,000 to $3,000.

    • Building and pest inspections

      Many houses have problems that aren’t obvious during an open house, so an inspection is key for detecting hidden issues. It can cost $500 to $750.

    Buying a house using a home loan

    The vast majority of buyers take advantage of home loans in order to afford their house purchase. However, not all loans are created equal! Knowing what to look for helps make sure you get the best deal.

    • Interest rate: A lower interest rate can mean substantial savings over the entire life of the loan. Also look at the comparison rate, which is a truer estimate since it includes the extra fees

    • Fees: Watch out for overly steep application fees, establishment fees, ongoing maintenance fees, or discharge fees since these can easily stack up.

    • Custom features: Look for lenders that offer flexible options to accommodate your situation. This could mean allowing additional repayments, free redraws, offset accounts, split interest loans, or packaged discounts.

    • Term of the loan: A shorter loan will mean higher monthly payments but likely less interest overall. The longer the loan, the more time the interest has to build and grow.

    Home Buying Checklist

    With so many parts to the home buying process, it’s easy to lose track of everything you have to do. This list is meant to serve as a roadmap to help prepare you for what’s ahead.

    1. Looking for a property:

      Research the property market in the area you want, attend open homes, and partner with a real estate agent to get private viewings.

    2. Checking the sale offer:

      After you’ve found the house you want, ask for a copy of the contract of sale from the property agent. Review this carefully.

    3. Finding and applying for the best loan:

      Collect loan offers from multiple different options, and ask your bank or lender if you can secure pre-approval. This step is where MNY comes in.

    4. Arranging inspections:

      Hire specialists to perform building and pest inspections so that they can detect any hidden issues with the property before you get too far into the process.

    5. Making the offer:

      You’ve found your dream house —now you have to actually lock down the purchase! There are two main ways that home sales take place:

      • Private sale offer – In a private sale, there is a contract directly between the buyer and the seller, or between their two real estate agents. This is the most common way to buy a house.
      • Bidding at auction – In a real estate auction, buyers bid directly against each other. Because there is no cooling-off period for auctions, you may want to watch a few auctions before you bid for yourself.

    6. Signing the contract and paying the deposit:

      Have a conveyancer or solicitor thoroughly inspect the contract to make sure you won’t have any nasty surprises after you sign. You will also initiate the deposit payment to the seller.

    7. Completing the new ownership paperwork:

      You will need to sign a transfer of land document, as well as registering the purchase at your state’s Land Registry Services.

    8. Paying the stamp duty:

      Soon after the purchase, you will need to pay the stamp duty, which is the government’s tax on property sales.

    9. Buying home insurance:

      You should research building insurance ahead of time to make sure you are covered from the very first day that you legally own the property.

    10. Arriving at settlement day:

      You should conduct a final property inspection to make sure it’s still in the condition you expect. You will then transfer the remainder of the purchase price to your solicitor or conveyancer, who will pay the seller. You now get the title of ownership and the keys to the property.
      Enjoy your new home!

    FAQ for how to buy a house

    Can foreigners buy property in Australia?
    Yes. However, lenders will impose additional restrictions on non-Australians. These could include higher interest rates, larger deposits, and approval from the Foreign Investment Review Board. Non-residents are also blocked from purchasing “established dwellings,” i.e they can only buy new property or empty land.
    What might stop you from getting a loan?
    Certain parts of your background might become red flags to prospective lenders. The most obvious is a history of not paying off your debts. Another big factor is stability within your employment and residential history. Additionally, the type and value of the property you want to buy will play a big role.
    Can I buy a house with no deposit?
    Almost certainly not. A zero-deposit loan would pose a great risk for the lender and would only be granted in special circumstances based on income and repayment history. Most loans require a minimum of a 5% deposit. Keep in mind that deposits below 20% will likely mean you’ll have to purchase Lenders Mortgage Insurance.

    Final thoughts on how to buy a house in Australia

    Buying a house can be a challenging undertaking, and if you don’t plan properly, you can end up in a world of financial hurt. That’s why it’s important to do your research and learn what resources are out there, especially if you’re just buying your first house. Ultimately, buying a house should be a rewarding experience that empowers you and your family for the future.