"Interest Rates are done by the Reserve Bank"

Inflation

At the moment, inflation's high. What that means is the cost of lettuce might be more, the cost of petrol might be more, and the cost of a beer at the pub might be more. And everything's costing more. And unfortunately, what happens when that happens is that the Reserve Bank has to get control of it because if it goes too high, then wages have to go up higher - which would wreak havoc on businesses everywhere. So the Reserve Bank adjusts interest rates to combat the effects of inflation.

Different Kinds Of Interest Rates

There are two different interest rates - Principle and Interest or Interest Only. As a first home buyer, you'd only be probably offered from the bank's Principle and Interest. This means is they're going to give you the money that you need to buy the home.

Hypothetically, let's say the home you want to buy is a million dollars, and the bank approves your loan and says your principle and interest might be 3.5% now. At 3.5% per cent, you're paying $35,000 in interest. However, you would also have to pay some of your principle off. So at the end of the loan, you don't end up with a million dollars after 30 years. So what they do is they then have a trickle back of what that would cost, and they add that on top of it and then they divide it by 12 and that's how they give you the interest rate.

So you've got your finances sorted and found a property that ticks all of your boxes - but how do you put an offer in? In episode 5 of First Home Buyer's Guide, real estate agent Max Manning runs the audience through the steps of what to do when you are ready to put an offer in.

Talk To Your Agent

You'd want to speak to the agent fairly quickly. Legally, things have changed a little bit now - so you need to be doing things in writing. As far as an agent is concerned, if they get an offer via text or email, or anything that creates a paper trail or electronic paper trail, they'll be able to present that offer to their seller.

Unsolicited Advice

Probably the biggest issue I've come across, especially with the first home buyers, is all family members seem to be real estate agents. "No, no, no, don't offer this... What you want to do is you want to do this..." I've seen so many couples miss out on properties because their parents, relatives and friends offer bad advice on making an offer.

Discussing Your Offer

What usually happens next is the agent will go back to the owner and discuss the offer. We want to get as much information from the buyer as possible, so we've got as much ammunition in the gun, so to speak, to try and get the deal across the line for them.

We need to know their circumstances, what your financial situation's like, say preapproval, and settlement time. We take all that back to the owner and then, it's their decision. The agent will put their 2 cents in and say, "Look, this is what we think" or whatever the case may be, but ultimately it's the seller's decision.

Further Negotiations

There is a little bit of a negotiation process there as well. It's not every day that the first offer is accepted. And by law, every offer that's formally put forward must be presented to the seller. There is a little bit of to and fro, and back and forth. That's the next part to be expected. Once you've agreed on a price, well then, you get the paperwork started and away you go.