Are you thinking about buying a home? Perhaps you are looking to own and occupy or invest in property in Australia. 20% of taxpayers (as of 2019-20) in Australia own an investment property and is one of the more popular investments for Australians looking to bolster their income and gain long term capital growth. What do you need to know about buying a home – either for living in or renting out – before you make the plunge?

Financing your home

Unless you have extremely deep pockets, most people will need to finance a property with a mortgage. A mortgage is a loan used to buy a home. With a mortgage loan, you may borrow a large sum of money from a lender to buy a property and pay it back over time. You will need to meet basic eligibility such as being over 18, having stable and sufficient income, being a citizen or permanent resident (though exemptions can apply). You should know your credit score at this stage and have a deposit saved up. At least 20% is required to avoid Lenders’ Mortgage Insurance.

Ancillary costs and due diligence Whether you are owning or investing, you will need to consider a few upfront costs. These may include stamp duty, legal and conveyancing fees, search fees, pest and structural inspection fees, and buyer’s advocate fees, if you want a third party to do research for you. This will affect your return on investment, so make sure you have factored in all these costs before buying. Sometimes people buy “fixer uppers” to renovate and “flip” for a profit. However, immediate flipping (within 12 months) may be discouraged as it attracts the full amount of Capital Gains Tax (CGT.)

First home buyers’ incentives

In most states and territories of Australia, you can take advantage of first home buyer’s grants or schemes that offset part of your stamp duty payable, lump sum payments to contribute to costs, guarantees on loans by the government if you have a small (under 10%) deposit, and others. Check your state or territory revenue office for more information.

Overseas investment

People from overseas can invest in real estate, pending approval from the government. Overseas investors must submit a foreign investment proposal for approval and give notice to the Register of Foreign Ownership of Australian Assets. You must be prepared to face rejection, or additional tax obligations as a condition of acceptance.

Bad credit home loans – are they feasible? It can be difficult getting finance for a home if you have bad credit – but it isn’t impossible. As part of a lender’s responsibility to borrowers, they must ensure that a loan will generally improve an applicant’s financial position, not make it worse. That means people with bad credit may need to supply additional evidence of good banking or financial status, as a credit score can reflect adverse credit events (defaults, unpaid bills, etc.) for up to seven years. This may include evidence of stable income, employment history, residential history, how much deposit you have saved, and your borrowing amount. Speaking to a specialist bad credit lender or broker can improve your chances.

The advice in this article is general in nature. Contact a financial adviser before applying for any type of credit or finance.