This guide provides you with the key steps to help you better understand the home buying process in South Australia.
- Saving for a deposit and other costs
- Working out what you can afford to borrow
- Choosing a home loan
- Meeting with a Loan Consultant or Mortgage Broker
- Getting finance pre-approval
- Finding a suitable home to buy
- Negotiating with real estate agents
- Engaging a Conveyancer
- Making an offer
- Signing the contract of sale
A home deposit and up-front costs are often the biggest hurdle for first time home buyers who want to buy a home.
A deposit is the upfront amount of money that you need to pay the vendor to secure the purchase of your home. Deposits are often quoted as a percentage of the full price of home.
Deposit requirements can vary between lenders - some lenders may let you buy a home with as little as a 2% deposit, however, a bigger deposit shows lenders you are a good saver and able to manage your finances. This can increase your chances of getting approved for a home loan.
If buying on the open market, you will likely need at least a 10% deposit, unless the contract specifies a different amount. This may be different to the deposit required by your lender. You will also need money to pay for the other upfront costs of buying a home, including stamp duty, and other fees and charges.
What help is available for deposits and up-front costs?
Many lenders have low deposit loans available, however you will usually be required you to pay lenders mortgage insurance (LMI) if you don’t have at least a 20% deposit. For example, if you are purchasing a $400,000 home you would typically need a deposit of $80,000 to avoid paying LMI. The LMI for a $400,000 home at a 90% loan is about $7,000.
Government assisted loans, including the Home Guarantee Scheme or HomeStart Finance’s low deposit loans (2-5% deposit) – allow you to avoid paying LMI on a low-deposit loan – helping you get into a home sooner.
Additionally, Eligible First Home Owners buying a new-build home in South Australia can receive a $15,000 First Home Owner Grant plus stamp duty relief of up to $29,580 - which can significantly help to reduce the up-front costs of buying a home.
How long it takes to save for a home deposit
Saving for a house deposit takes time and it is important to be realistic about how long it might take. Savings calculators can show you how long it will realistically take you to save for a deposit. Having a long-term savings plan to save up money and sticking to a budget will help you achieve your home ownership goal.
As of June 2022, research shows that it might take 11 years for a median income household in Adelaide to save for a full 20% house deposit – which means low-deposit loans are a great way to fast track your goals.
Up-front purchasing costs
Typical up-front costs when buying a home include:
- Lenders Mortgage Insurance
- government charges like stamp duty (approximately $16,300 for a $400,000 home) and Land Services SA fees (approximately $3,500 for a $400,000 home)
- loan establishment fees (around $200–$900)
- legal and conveyancing fees (around $500–$2,000)
- Building and Pest inspection fees (around $500–$700) each
Lenders may require you to provide a building insurance Certificate of Currency for the home you intend to purchase. Therefore, it is important to do some research to work out the cost of insurance as you may be required to take out a policy prior to settlement.
As well as budgeting for the up-front costs of buying a home, it is important that your budget allows you to cover the ongoing expenses of owning your home, such as:
- building insurance
- maintenance (over time the condition of your house will deteriorate, and repairs not covered by insurance may be required)
- water bills
- council rates
- emergency services levy
- strata fees if applicable (when purchasing a strata or community titled home such as a unit or townhouse).
These ongoing costs can easily amount to $150–200 a fortnight – and thousands of dollars a year. It is important you budget for these costs and are confident you can pay for them on your current income.
Council rates are typically paid quarterly, and the rate can vary depending on the council and value of your home. For more information, get in contact with the council in which the home you want to buy is located, or ask the real estate agent. Quite often the costs of council rates, water charges, emergency services levy, and any strata fees will be found on the back of the property brochures that are handed out at open inspections. This is helpful to know when working out your budget.
Your bank will want to know that you can afford these expenses when they assess you for loan pre-approval.
A list of all of the expenses you should consider can be found on moneysmart.gov.au.
How much you can afford to borrow depends on:
- your income and debts
- the amount you have saved for a deposit (and any other savings)
- your credit rating.
Be aware that if interest rates rise your loan repayments could go up. You can compare different interest rates using a mortgage calculator.
A common way to search for a home loan is to use a comparison website. Keep in mind that comparison websites will only show lenders which they have a commercial relationship with, so you might not be getting the full picture. Try searching lenders’ websites directly for more details.
When reviewing interest rates, ensure you consider both the interest rate and the comparison rate.
Principal and interest or interest-only?
A principal and interest (P&I) loan is most common type of home loan. Regular payments are made on the amount that has been borrowed (the principal) and the interest on the principal. A P&I loan is typically paid off over a long term (25 or 30 years).
With interest-only loans, your repayments only cover the interest component of the amount borrowed but not the principal. This means your repayments may be less when compared to an equivalent P&I loan, but you will not be paying anything off the principal amount.
Variable or fixed?
A fixed interest rate is ‘locked in’ for a set period (e.g. three years). A fixed rate can provide certainty around the repayment amount over the specified period, which can make budgeting easier. However, you won’t benefit if interest rates go down (or be impacted if they go up) and if you want to switch loans during the specified period, you may be charged a break fee. There are also less loan features associated with a fixed rate loan (e.g. no offset option).
A variable rate is subject to change with lending market conditions (e.g. when the official cash rate changes), so your repayment amount might go up or down. This can make long term budgeting more difficult. On the plus side, a variable rate loan is usually easier to switch out of if you find a better deal and more loan features can allow for greater flexibility when managing your repayments.
Many lenders will allow you to split a loan between fixed and variable (e.g. with a $400,000 loan you could allocate $50,000 as variable and $350,000 fixed, allowing you to enjoy some of the features of a variable loan and the certainty of the fixed loan).
An offset feature allows you to link your home loan to an everyday bank account (e.g. savings account). The amount you have in that savings account reduces (offsets) your home loan principal amount. For example, you might have $20,000 in your savings account and a home loan of $400,000. The $20,000 savings reduces your mortgage principal to $380,000, so you are only paying interest on that amount, not the full $400,000. This can help you to reduce the amount of interest on your home loan and encourages you to create sufficient savings to avoid mortgage stress.
Similar in concept to the offset feature, a redraw facility allows you to make extra payments towards your home loan. You can withdraw these extra payments if you need to. Unlike an offset account, some banks will charge a fee to use a redraw facility on your account and there may be some delays in accessing funds.
If you find choosing a home loan confusing, you can get help from a loan consultant or mortgage broker.
Loan consultants are associated with a bank or lender and help customers choose a loan product and complete the necessary paperwork. The best way to get in contact with a loan consultant is to contact your preferred bank or lender.
Alternatively, you can use a mortgage broker who can access a wide range of home loans and will work with you to:
- understand your home buying goals
- determine what you can afford to borrow
- present you with options that suit your situation
- explain how each loan works and what it costs (e.g. interest rate, loan features and fees)
- apply for a loan and manage the purchase process through to settlement.
How mortgage brokers get paid
Mortgage brokers get a fee or commission from financial institutions for selling their products. This means you probably won’t have to pay for their services.
Some brokers get paid a standard fee regardless of what loan they recommend. Other brokers receive a higher fee for offering certain loans. You should ask upfront whether the broker is receiving a higher commission for recommending a specific loan product to you.
Sometimes, a broker will charge you a fee directly – instead of, or on top of, the lender's commission.
If you're not sure whether you're getting a good deal, ask around or look online to see what other brokers charge.
Questions to ask your mortgage broker
Be sure to ask a lot of questions and get the broker to explain how each loan option works, what it costs and why it's recommended to you.
- Do you offer loans from a range of different lenders?
- How do you get paid for the advice you're giving me? Does this differ between lenders?
- Why did you recommend this loan to me?
- What fees will I have to pay when taking out this loan?
- What features (options) come with this loan? Can you show me how they work?
- What is the threshold for lenders mortgage insurance and how can I avoid it?
Get a written quote from the broker that tells you the:
- type of loan
- loan amount
- loan term (duration)
- current interest rate
- fees you have to pay (for example, broker's fee, loan application fee, ongoing fees).
Make sure you're comfortable with what you're agreeing to and ask more questions if there's anything you're not sure about.
Remember: you don't have to accept the first loan you're offered. Ask to see loans from other lenders so you can compare. A small difference in interest will add up to a large amount over time, and if you can get a lower interest rate from another lender, you could save thousands of dollars. If you are unhappy with any option, ask the broker to find an alternative.
Consider getting finance pre-approval from a lender so you’re ready when you register interest in buying a HomeSeeker SA property. Pre-approval lasts for 3–6 months and shows you're eligible to apply for a loan up to a certain amount. It doesn't commit you to a loan, but it does help you set an affordable price range and tells sellers you're serious about buying.
The lender will ask for evidence of your current financial situation to determine your ability to repay the loan. Other documents that may be necessary for pre-approval include:
- proof of identification (e.g. passport, birth certificate, driver’s license)
- proof of employment and income (e.g. recent pay slips, tax returns)
- proof of savings (e.g. bank statements showing savings and any additional debts)
- proof of assets (information about any other properties or assets you own)
- a completed mortgage application form.
Typically, there are five key factors that a lender will consider when deciding if and how much they are willing to lend you:
The lender will review your credit history and job status to determine if there are any ‘red flags’ to consider. Being able to pay bills on time (e.g. utilities) demonstrates ‘good’ character and highlights that you have control of your budget.
- Money (capital)
The lender will consider much of your savings you are willing to contribute to the deposit (more is generally considered better).
- Ability to repay
It is important for the lender to be confident that once you have a loan, you are able to afford the repayments for the life of the loan. Factors such as income, history of employment, job stability and current debts will be looked at to make sure you can afford your repayments. Note, any credit cards you own will be considered ‘maxed out’ as a current debt.
- Property owned (collateral)
Property you own (e.g. building or equipment) can be used as collateral against the loan. This means if you are regularly unable to make your mortgage payments the bank has the right to seize your property to repay the debt (although this would be a last resort).
- Financial conditions
A lender will also consider the interest rate, the size of the loan and the general market conditions. For example, when the economy is strong a lender might be more confident that you will be able to make your repayments and might lend you a higher amount.
When assessing your character as part of the pre-approval process, a lender will likely generate a credit report about you from an online database that stores records of any loans or credit you have applied for and/or been given.
So if you have ever applied for credit or a loan, there will be a credit report about you. The good news is you can generate this report for yourself online for free. Just search online search for ‘free credit report’ (or search for reputable credit reporting agencies such as Equifax, CheckYourCredit or Experian).
If something is wrong or incorrect on your credit report, contact the credit reporting agency and ask them to fix it.
Know why you're buying
Reflect on why you want to buy. To avoid renting? Are you planning to grow your family? Do you want to renovate? If you're buying with a partner, talk about this together. Being clear about why you're buying helps narrow down your property search.
Consider your must-haves vs nice-to-haves
Make a list of your:
- 'Must-haves', i.e. things you can't do without, e.g. property size, layout, public transport, schools
- 'Nice-to-haves', i.e. things you could do without for now, e.g. design, fittings, outdoor space
Stick to your price range
If your ideal suburb is outside your price range, be flexible about where to look and consider adjoining suburbs.
Do your research
Look online, talk to real estate agents, go to property inspections, get a feel for potential new neighbourhoods and take time to review what homes are on offer. Pace yourself as the search could take several months.
New build vs established home
While many people have their heart set on either building a new home or buying an existing home in an established suburb, the following table lists some important things you need to think about.
Constructing a new home can take 8–12 months depending on the size and complexity of the build. Building during winter can sometimes mean wet weather delays.
Quicker purchase process
Purchasing an established home can often be completed in less than three months.
Unlike an established home, when you build a new home you will typically have to pay extra for landscaping, lawns, curtains, tool sheds and other features such as light fittings that often are part of the package of an established home. However, it also means you can set up your home exactly as you please.
Less additional costs
Most established homes will not require the same additional costs of a new build (e.g. landscaping, sheds, light fittings etc.).
There may still be additional costs (e.g. repairs and alterations) associated with an established home but you should be able to determine these in advance at inspection (e.g. old fence needs replacing).
You are not buying a finished product
As you cannot inspect before buying, a new build may end up different to what you expect. However, most builders will provide you with architectural plans and renders that can give you a feel for the layout of the home before buying.
It’s clear what you are buying
When inspecting established homes prior to purchase, you can get a clearer idea what it will be like to live there.
Access to First Home Owner Grant and Stamp Duty Relief
For eligible first home buyers building a new home and the cost is under $650,000 you could receive a $15,000 First Home Owner Grant, as well as up to $29,580 in Stamp Duty Relief.
No First Home Owner Grant and Stamp Duty Relief
The First Home Owner Grant and Stamp Duty Relief are not available for established homes.
Often in outer suburbs
New homes are built in outer suburbs due to the availability of undeveloped land. Consider the distance to shops, public transport and time spent commuting to work.
Land is often cheaper in outer suburbs so you might find a new build in these locations more affordable.
More choice for location
As there are more existing homes for sale than there is land available for new builds, you will likely find more choice for locations with established homes.
Keep in mind that land prices are typically more expensive the closer you are to the city centre.
Inspecting the property
If purchasing an existing home, attending an open inspection can be daunting. However, it is important to avoid being distracted by the interior design and ensure to look out for potential maintenance issues, including:
- checking for water stains, corrosion and mould (not a structural issue but could be costly to repair)
- assessing ceilings for sagging
- looking inside cabinets in all wet areas (indicates water leaks or rising damp)
- checking the walls for large cracks (cracks of more than 2.0 millimetres width are cause for concern and should be inspected by a qualified building inspector)
- checking for mould in bathrooms and bedrooms (mould can be bad for your health and sometimes requires expensive professional cleaning)
- checking the internal wall plastering for fine cracks (may crack further and come loose when wall fixtures are installed)
- looking at external roof lines (ensure they are straight and free from deflections).
It is also worthwhile to consider the location of the property: is it near a major road, noisy pub or factory? Is it close enough to schools and public transport?
Hiring a building and pest inspector
If you are getting serious about buying a property and want certainty that the building is in an acceptable condition, you'll need to hire a building and pest inspector. This is something you can put in the offer form as a ‘Condition of Sale’ and organise for the inspection to be done once your offer has been accepted.
When looking for a building and pest inspector:
- ask people you trust to recommend someone
- check reliable building reviews online
- seek a few quotes and check what each inspection quote covers
- confirm how long it will take the inspector to produce the inspection report — particularly important if you are purchasing a house and need an inspection done urgently
- check that the person you plan to hire is suitably skilled – while building inspectors don’t need a particular licence or registration, if they’re a registered architect or a licensed builder, they will have met certain qualification requirements; you can check builders’ licences on the CBS public register. Pest inspectors however, are required to be licenced. You can check if a Pest Inspectors is registered here
- check whether the inspector holds Public Liability and Professional Indemnity insurance.
You'll find further information on pre-settlement inspections and what to look for on sa.gov.au.
The real estate agent acts for the seller of the property and when you attend an open inspection it’s important to get as much information from them as possible. With good information, you can make the right decision on whether to purchase the property or not.
Here are some recommended questions to ask the real estate agent:
- Why is the property on the market?
The answer to this determines how quickly the owner would like to sell. For instance, if they are selling in order to buy another home, they may be more willing to negotiate in order to get into their new home sooner. Knowing the seller’s motivations can work to your advantage.
- How long has the property been on the market?
If a property has been on the market for a long time, the seller could be more likely to negotiate on the price.
- When was the property built?
Older homes will generally need more maintenance and repair, unless they have recently been renovated.
- How many owners has the property had?
If a property has been passed from one owner to another many times it’s worth considering why.
- What are the council and water rates?
This allows you to calculate your on-going expenses to determine if you can afford to live there.
- Are there any repairs needed on the property?
If you ask the agent if there are any issues with the property that the owner knows about (it could be something that you can’t see by walking thru the property), the agent must disclose this information. This should prevent any unexpected repair costs when you move in.
- What settlement terms are the owners looking for?
The owners may have purchased another property and need to settle quickly (usually 4 – 5 weeks) or they may be keen on a longer settlement if they are still looking for another home or waiting for a home to be built. This information is helpful if you are presenting an offer to purchase.
- What deposit amount would do you recommend?
If you purchase a property at an auction, you would need to pay a 10% deposit on the day, however buying a property that is not sold at auction doesn’t have the same requirement. Legally, you cannot pay more than 10% but there is no minimum requirement. Ask the agent what expectations the owner would have and use this information to complete your offer form. When you pay a deposit the money does not go to the owner straight away, it sits in the real estate's trust account and is released when settlement occurs.
If you can get the answers to these questions, you’ll be in a better position to make a decision before putting in an offer.
A conveyancer is appointed by you and will act to protect your interests in the property settlement process. If you are new to the home buying process, you may not know what conveyancers do and their role in the process of buying a home.
Conveyancing is the term for the legal and statutory processes required to effect the transfer of ownership of real estate from one person to another. The preparation, execution, verification and lodgement of numerous legal documents are important elements of conveyancing.
Whether buying or selling, you should be aware of anything affecting the property such as proposals by government departments, illegal buildings, or outstanding rates. On your behalf, the conveyancer will conduct the appropriate searches and inquiries on the property.
In summary, conveyancers undertake the following services.
- Certificate of Title searches
- searches of government departments and local authorities
- advice on the effect of the contract
- preparation and certification of legal documents
- stamping of required documents
- calculation of adjustments of rates and taxes
- preparation of settlement statements
- liaising with mortgagors and financiers.
To find a good conveyancer, compare their answers to the following questions:
- May I see proof of your Australian Institute of Conveyancers membership and Consumer and Business Services registration?
- What's the maximum I can expect to pay in fees and charges?
- What are your fees and what services are included in those fees?
- What will any additional services cost?
- What government fees and charges will I need to pay?
- How long will settlement take?
- How will you keep me up to date with what's happening?
You can find other useful resources from the Australian Institute of Conveyancers (SA).
While finding a house you love is exciting, it's easy to get carried away by your emotions. It is important to stick to your budget and be as clear-headed as possible when bidding or negotiating to buy.
When you're ready, there are two ways of making an offer:
- unconditional — a binding contract to buy outright, if you have confirmed finance and are sure about the property
- conditional — becomes a binding contract to buy, if certain conditions are met (e.g. valuation, finance approval, inspections).
If you're a first home buyer, observe a few auctions so you understand how they work. Bring an experienced friend or family-member along to help you bid.
If buying at auction, you are likely to be required to pay a deposit immediately (e.g. 10% of the purchase price). There's no cooling-off period if you buy at auction. If you change your mind after signing the contract you will be in breach of the contract and will lose your 10% deposit.
Before deciding to bid at an auction, you should inspect the vendor's (seller's) statement. Information about the property that must be disclosed to the purchaser is included in the vendor's statement. This must be made available for inspection prior to the auction and can assist you in deciding whether or not to bid for the property.
Some particular things to look out for are Easements (for example a water or gas main that runs thru the property and may have to be dug up if in disrepair) or Covenants (restrictions on future developments or renovations). These are things that your conveyancer will be looking out for and give advice on.
To formalise your offer to purchase a home, you sign a contract of sale.
As a potential buyer, first inspect the property and talk to the real estate agent or seller before asking to see the contract of sale. You can get help from a solicitor or conveyancer to review the contract before signing, which might help to avoid costly mistakes.
Both the purchaser (you) and the vendor (seller) have to sign a contract of sale document before the purchase offer is legally binding. Until the document is signed by both parties it is still considered to be on the market.
Finalising the sale
Once you make an offer that the seller agrees to, you and the seller will sign a contract. Once the contract is signed and you've paid the deposit, you are obligated to proceed with buying the property on the settlement date, subject to agreed conditions (e.g. being able to get finance approval). If you pull out of the purchase, you may have to forfeit the deposit.
Once the contract is signed by the seller, there is a two-day cooling-off period. This commences when the contract is executed and the vendor's statement is served on the purchaser. Once the cooling off period finishes, the deposit is to be paid to the real estate’s trust account. Purchase via auction is an exception to this rule because the vendor's statement can be inspected prior to the auction.
Finalising your loan application
When you are ready, tell your lender you've found a property you want to buy so you can finalise your loan.
Formal unconditional (full) approval can only be completed once the lender has verified all of your outstanding information (including the property valuation) and can take between one day and two weeks to complete.
Full approval is final and is given to you once all the necessary documentation has been assessed and processed. This is why most contracts of sale contain a clause in them that states the sale is conditional on finance. If the loan (finance) is denied, the contract of sale falls through, your deposit is returned and you won't be able to purchase the property.
The settlement date is when the property title is transferred into your name, and your mortgage begins. Your solicitor or conveyancer will finalise the settlement with the lender and seller. Once complete, you will receive the keys to your new home!
Advice contained in this website is only of a general educational nature and should not replace financial advice from a qualified professional, tailored to your specific and personal circumstances.