Why saving a deposit was the easy part when we bought our first home

Announce that you are looking to buy a home and you’ll be inundated with advice but the one tip you’ll hear over and over again is “the hardest part is saving for the deposit”.

But what I learned while buying my first home last year was getting the deposit was actually more straightforward than other challenges faced along the way.

Stamp duty exemption

After spending the year on a self-imposed Uber ban and taking packed lunches to work, we couldn’t wait to meet with our mortgage broker.

We thought we had researched everything, but it turned out we had missed some crucial points regarding stamp duty exemptions.

My partner owns an investment property, but had heard from other investors we would still be eligible for the exemption. As it turned out, no one really knew if we qualified. Our broker didn’t know, our bank didn’t know, and our solicitor didn’t know.

However, after consulting Revenue NSW we found we were ineligible. We were looking at an extra $20,000 we hadn’t budgeted for.

First Home Buyers Australia director Taj Singh said this was a common misconception. “Unfortunately if one partner has already bought a home it would deem the couple ineligible,” he said.

“However some states do allow a partial exemption based on the per cent owned by the person who has never bought before.”

The buying process 

After deciding to persevere, and agreeing to eat two minute noodles until 2020, we applied for a loan and were granted pre-approval.

Then it was time for the fun part – spending every Saturday racing through traffic for inspections. It was an interesting time to buy in Sydney as the market had begun to fall.

Century 21 Five Dock managing director Danny Michael said the current market was becoming difficult for buyers to navigate,

“Some of the biggest hurdles we are facing are that vendors today are expecting to sell their property at 2016/2017 prices,” he said.

“Purchasers’ borrowing amounts have lowered due to needing larger deposits and it has been difficult in selling a property to what a purchaser is willing to pay.”

We experienced this phenomenon first hand. One property we made an offer on ended up being taken off the market because the vendor was unhappy with the offers they had received. Another vendor changed changed their mind and raised the asking price by $20,000. It’s still on the market.

We finally got what we were after in our third property. It had been for sale for a number of months and a change of circumstances meant the owners were keen to sell.

High risk suburbs

The elation of finding a property quickly disappeared three days into the cooling off period when the bank told us they were not able to lend to us due to the property being in a “high risk suburb”, a term they had only just brought up.

High risk suburbs are classified by banks when they foresee potential future risks with the area, according to Singh. “A bank may also decide to restrict lending if they already have too much exposure in that location,” he said.

“If a bank has already approved a large number of mortgages in a suburb or even in the one high-rise development, it may not be willing to approve any more loans in the same location.”

“Not all banks will have the same issue with a particular suburb – so there may also be alternative options for first home buyers to consider.”

We had seven days left of our cooling off period to find a new bank that would lend to us or we would risk losing the property. This meant we had to obtain unconditional approval, a valuation, a strata report and pay the deposit within seven days.

We ended up getting approvals through a smaller bank and scraped through with two hours to spare.

Buying a tenanted property

Three days out from settlement we were faced with another hurdle. The property we had purchased was tenanted, and although the tenants had received their required 30 days notice they had not moved out.

We had already organised to move from the property we were living in, so to find this out 72 hours from settlement was not ideal. But what shocked us more was advice that purchasers actually have little rights in this situation – we just had to hope the tenants moved out soon.

Mr Michael said while a tenanted property can be great for investors it could lead to huge issues for owner occupiers.

“When you purchase a property as an owner occupier there are some challenges involved such as ensuring that the tenants move out and return the property to the original state,” he said.

“Sometimes, tenants need to be taken to a tribunal to have the orders put in place. This process can be long and costly to the vendor and the purchaser will then expect a delayed settlement.” he said.

In the end we were lucky. The tenants moved out the day before their tribunal date and we only settled a week later than expected.

But now, when I give advice to first home buyers I’ll be telling them one thing: expect the unexpected.