First Home Buyers Guide (ACT & NSW)
Buying your first home can sometimes be a complex and daunting process. Our property team at FGD can guide you through all the steps to securing your first home in the ACT and NSW, while ensuring a stress-free and rewarding experience for you at all times.
- Step 1: Organise your finances
- Step 2: Determine if you are eligible for a duty exemption, concession or grant
- Step 3: Choose your home
- Step 4: Review and sign the contract
- Step 5: Exchange your contract
- Step 6: Prepare for settlement
- Step 7: Settlement day
- Step 8: Post-settlement
Before you start looking for a home, you should have a good understanding of your financial position including your borrowing capacity, how much you will need to save for a deposit, and your ability to make repayments, while also taking into account any money left over for other expenses.
It is important to seek financial advice from a lending manager or mortgage broker to obtain the estimated costs associated with buying a home, which can also consist of lenders mortgage insurance (LMI) if you are borrowing more than 80 percent of the property value. A number of lenders are participants of the First Home Guarantee Scheme, which is an Australian Government initiative to support first home buyers to buy a home sooner with a deposit as little as 5% and with LMI waived.
There are also calculators available online for you to self-assess your borrowing and repayment capacities and any other associated costs.
What are the upfront costs?
On top of the purchase price, there are upfront costs associated with buying a home including:
- Stamp duty (if any);
- Land Titles Office registration fees;
- Legal and conveyancing fees;
- Home insurance;
- Rates, water charges, and body corporate levies; and
- Building inspection report.
These costs can add up to thousands of dollars so it is crucial that they are considered when budgeting for your first home.
You will also need to consider the type of home loan that is right for you. Once you have decided on a home loan that you are comfortable with, you can start your application for a pre-approval. You can submit your pre-approval application online through your lending manager or mortgage broker. Your application will be assessed based on your proof of income, details of your assets and liabilities and personal circumstances such as residential status and dependents.
Pre-approval means the lender has completed a preliminary assessment of your financial situation and agreed to lend you a certain amount but this will be subject to you meeting the terms and conditions of the loan. Once you have received your pre-approval, it is a good idea to speak to your financial advisor to make sure what you have been pre-approved for is based on an accurate representation of your financial circumstance.
Pre-approvals are valid for 3 months. If you have not bought a property within the 3 months period, you may need to resubmit a new application and go through the finance approval process again.
The ACT Government has a concession scheme in place to assist first home buyers to secure their first home by removing or reducing stamp duty on the property, known as the Home Buyer Concession Scheme (HBCS). You can check the full eligibility requirements for the HBCS on the ACT Revenue Office website, which also has an online Questionnaire available to assist you in determining your eligibility.
First home buyers in NSW may be eligible for a First Home Buyers Assistance Scheme, First Home Owner Grant or Shared Equity Home Buyer Helper. You can check the full eligibility requirements on the Revenue NSW website.
Our property team at FGD can walk you through the application process for the relevant exemption, concession or grant.
Once you have an idea of what you can afford, the next step is to start looking at properties as well as the area or suburb that you picture yourself living in.
At the same time, it might be worth doing research into the current property market to gain a better understanding of what is available out there and the purchase price for recently sold properties in the surrounding area.
When can I go for an inspection?
The first time you inspect a property will be at an open home or at a private inspection with the sales agent. This inspection will give you an idea of whether you want to place an offer on the property or keep looking.
At your first inspection, it is unlikely that you will have the opportunity to check everything at the property.
A pre-exchange inspection will usually be offered to you before you exchange contracts (if the method of sale is a private treaty). This is where you can reinspect the property in its current condition and state of repair. If there are any defects at the property that you would like the seller to attend to prior to settlement, and if agreed by the seller you will need to make sure there is a special condition included in the contract to avoid issues down the track.
You can download our Pre-exchange Checklist to bring to your pre-exchange inspection, which has a comprehensive list of what you will need to look for at the inspection.
When should I place an offer on a property?
You will need to find out from the agent whether the method of sale will be a private treaty or auction.
If it is a private treaty, you will be able to place an offer in writing on the property at any time for the seller to accept. If the seller accepts your offer, the agent will make the necessary arrangements to obtain details from you as the buyer including, your solicitor details.
A Sales Advice will then be produced and issued to both the seller and your solicitors. The seller’s solicitor will issue a contract for sale to your solicitor based on the information provided on the Sales Advice and you will then need to make an appointment to discuss and sign the contract with your solicitor.
If the property is to be sold by auction, you can only make an offer on the property by attending the auction and placing your bid. In some instances, the seller might accept a pre-auction offer if the seller believes that the offer would be better than what they could get at the auction.
We highly recommend that you seek legal advice on the contract before you sign the contract and proceed with the purchase. Our experienced property team at FGD can take you through the contract documents and discuss any questions and concerns you may have about the property as well as the conveyance process from start to finish.
At this time, you will have the opportunity to negotiate certain terms of the contract including:
- If 5% deposit is acceptable at exchange
- Add any other goods to the property not already listed on the front page of the contract such as air conditioning unit and remote, garage remote, dishwasher etc.
- Amend the Date for Completion
Our property team can also assist you with reviewing the auction contract prior to you attending the auction, however you may not have the opportunity to negotiate terms of the contract at auction as opposed to purchasing by private treaty.
At the same time, you can start arranging your finances by letting your lending manager or mortgage broker know you have placed an offer on the property so that a valuation of the property can be ordered and provided as part of the loan application. As the contract is not conditional upon you obtaining finance, you should ensure that unconditional approval is received prior to exchange of contracts.
When purchasing a property in NSW, you will be responsible for arranging and paying for a building inspection report (unless it is a unit), whereas in the ACT the building inspection report is required to be included in the contract for sale which has been ordered by the seller. The seller is then entitled to claim reimbursement from you on settlement for the cost of the report.
When and how do I pay the deposit?
If it is a private treaty, deposit can be paid any time from the time your offer is accepted and the time you exchange contracts.
It can be paid by electronic funds transfer directly to the Stakeholder named on the contract front page. This is usually the trust account of the sales agent or in some instances, the trust account of the seller’s solicitor.
The deposit can also be provided on exchange by way of a bank cheque in favour of the Stakeholder.
If you decided not to go ahead with the purchase, the deposit that you have paid will be refunded back to you as long as you have not exchanged contracts within this time.
If it is an auction, deposit is paid upon the fall of the hammer. In some instances, part payments are available where the remaining balance of the agreed deposit is due within 3 business days after the auction date/exchange date. The contract is deemed unconditional if you purchase a property at auction, therefore the deposit cannot be refunded.
The Stakeholder is required to hold the deposit until an authority, ‘Order on the Agent’ is provided to the Stakeholder upon completion of the settlement.
When you have signed the contract, conducted your pre-exchange inspection, paid the agreed deposit and obtained unconditional loan approval, the next step is to exchange contracts. Exchange is a legal process that completes the property sale process. Once exchange occurs, both the seller and buyer are committed to the contract until settlement.
What happens at exchange?
In most cases, there are two copies of the contract – one signed by the seller and one signed by the buyer. Both contracts constitute one and the same copy.
Exchange can occur electronically when the buyer’s solicitor sends a scanned copy of the buyer’s signed contract to the seller’s solicitor and the seller’s solicitor checks both copies of the contract to ensure they are identical. The seller’s solicitor then dates the contract and send a scanned copy of the seller’s signed and dated contract to the buyer’s solicitor.
If a signed Section 17 Certificate (if you are buying an ACT property) or a Section 66W Certificate (if you are buying a NSW property) is required at exchange, the buyer agrees to waive their right to the Cooling-off Period of 5 business days and contract is deemed unconditional.
Read more on Section 17 Certificate.
You or your solicitor should provide a copy of the exchanged contract to your lending manager or mortgage broker in order to progress your loan application and meet the deadline for settlement.
At this time, you must arrange a building insurance cover for the property (unless it is a unit) with a commencement date of the policy as the date of exchange and note your lender as the interested party.
Settlement is when ownership of the property is transferred from the seller to you as the buyer.
In the ACT, settlement can take place either by paper or electronically through the digital settlement platform known as PEXA. In NSW however, settlement can only take place on PEXA. Our property team at FGD can take you through each process in more detail.
To prepare for settlement, you will need to ensure that mortgage documents are promptly signed and returned to the lender, together with all the other lender’s requirements. If settlement does not occur on the date for completion due to the delays caused by your lender, you will still be financially liable to the seller for any damages. In most contracts, the penalty interest rate payable by you to the seller is 10% per annum of the purchase price, which accrues daily until the day settlement actually occurs. Some contract also provides for a 7 days grace period to settle without penalties.
If additional funds are required on settlement, you will need to have those funds available and cleared in your nominated shortfall account with the lender. If a shortfall account authority has not been arranged, you will have the option to deposit the shortfall funds in our trust account as an alternative.
A Settlement Statement will usually be made available to you for inspection a few days prior to settlement. Adjustments between the seller and the buyer for rates and water charges (including the upfront costs noted above) will also be made on the Settlement Statement.
For an ACT property purchase, you will need to complete the Buyer Verification Declaration form to notify the ACT Revenue Office of your purchase. This is where you note your stamp duty concession code if you are eligible.
You should receive a copy of the completed Buyer Verification Declaration in your email, you will need to forward a copy of the completed form to your solicitor. The reference code on the form will be entered into the Transfer instrument for registration at Land Titles Office. Once the Transfer has been registered, you will receive a Notice of Assessment (usually two weeks after settlement date) from the ACT Revenue Office advising of your exemption from paying stamp duty.
For a NSW property purchase, you will need to submit an EDR document stamping with Revenue NSW in order to obtain a Duties Notice of Assessment. This process can be completed by your solicitor and finalise on PEXA.
The settlement day is the day that the remaining balance of the purchase price is due.
You will have another opportunity to inspect the property prior to settlement (i.e the day before settlement or the morning of settlement) – this is known as a pre-settlement inspection. At this inspection, you will need to compare the condition of the property at the time you did your pre-exchange inspection to ensure everything is in the same or similar state.
Do I need to attend settlement?
In most cases, settlement occurs behind the scenes and is managed by the outgoing mortgagee (if the seller has a mortgage), the incoming mortgagee, the seller’s solicitor and the buyer’s solicitor. Therefore, there is no need for you to attend settlement on the day.
Most settlements are scheduled for 2:00 or 2:30PM, to allow your lender to arrange loan proceeds to be available and ready for settlement.
On settlement, your lender advances funds to pay the Seller to settle and at the same time, your mortgage is established.
You will be notified by your solicitor that settlement has been completed. After this time, you will be able to collect keys to the property, in most cases from the sales agent.
You can move into your new home any time after you have collected your keys but it might be wise to arrange a removalist and move in a few days after settlement. Settlement can sometimes be delayed and by the time you are notified to collect your keys, the office of the sales agent might be closed.
ACT Revenue Office and Icon Water will be notified of the change of ownership directly from ACT Land Titles Office. Similarly, the relevant Council in NSW will be notified of the change of ownership.
However, you will be responsible for arranging connection of your utilities, such as gas, electricity, internet, and telephone. You will also need to update your residential address with your employer, bank, insurance providers, Access Canberra, Council and the AEC. You may also want to consider having your mail re-directed through Australia Post for a few weeks post settlement.
Further, we recommend you change all the locks to the property for safety reasons as you never know who might still hold keys to the property – that is the tenant, the property manager or Airbnb guests.
Although the process of buying your first home can sometimes be stressful and that there are a lot to consider, as long as you seek professional advice along the way, you will be in capable hands.
If you are thinking of purchasing a property in the ACT or NSW, please get in touch with our experienced property team.
Tiffany joined us as a Property Lawyer after having been practicing exclusively in property and commercial law since her admission as a Legal Practitioner in the ACT Supreme Court.
Tiffany’s focus is to deliver excellent legal service and client experience, in particular, helping first home buyers navigate the complexities of purchasing their first home.
Siobhan takes pride in providing high-quality service to every one of her clients. Whether it’s buying a first home, or selling an investment property, her main objective is to provide her clients with a conveyancing service that is easy to understand, while still obtaining the desired result.
Her clients appreciate her positive nature and straight-forward approach, knowing they are in safe hands.