This new chapter of your life is a special one, and we want to be there to make it a smooth process for you! We love to help first home buyers with their mortgages and aim to remove the stress and uncertainty one may have.
Deposit amounts are always the most frequently asked question by a first home buyer because that’s the first step to take towards buying a home. Most banks require a 5-10% deposit, but the more you contribute, the less Lender’s Mortgage Insurance (LMI) you pay. You can borrow up to 80% of the property’s purchase price without having to pay LMI, but once you exceed 80% you must pay LMI which can be expensive!
Whilst having some savings behind you is important, your borrowing power is the main determinant of how much you can actually borrow! The banks want to look at your wages and then factor in other loan repayments and living expenses, to determine how much you can borrow under these conditions. This can be influenced by the changes in interest rates, where increases in rates can result in lower borrowing capacity. Check out our calculators to help you understand more!
There are some other costs that are included in purchasing a property, such as a stamp duty, which as a first home buyer if the purchase price is under $600,000 there is no cost, but if the purchase price is over $600,000 there will be a fee payable. Other costs include legal fees, lenders application fees, registration of mortgage fees and registration of transfer fee, whilst also considering house insurance, moving costs and house contents insurance as additional costs.
There are some schemes that can be used to minimise LMI as a first home buyer:
5% Deposit Scheme (previously the First Home Guarantee/FHG)
This scheme is aFederal Government Scheme, where they act as mortgage guarantor. Whilst they don’t actually own a portion of your property, they effectively act as the mortgage insurer and guarantee the amount you have borrowed above 80% of the security value, which means you pay no Lenders Mortgage Insurance. There is also a similar scheme where the government owns a percentage of your property, so please be aware of this scheme!
First Home-Owners Grant (FHOG)
A first home buyer scheme that helps to secure your first home! This is another Federal Government scheme, where they will give you a $10,000 grant to assist with financing your purchase. This has a different criteria, so use the link below to find out more or get in contact with us!
Family Guarantee
There is an option for your parents to act as a guarantor for your loan, where they put up their home as additional security to minimise and ensure the first home buyer’s mortgage is 80%. This results in the guarantor being liable for a portion of your loan, which is not a small or easy decision to make, both parties must be extremely comfortable and fully understanding of the risks associated with entering this loan.
Eligible buyers may access schemes like the First Homeowner Grant and the 5% deposit scheme or stamp duty concessions. Availability and criteria vary by state, so it’s worth contacting us to see what applies in your area.
Yes, some lenders accept deposits as low as 5 percent. This the government-backed 5% deposit scheme that may allow you to also buy with even less, without paying Lenders Mortgage Insurance.
Lenders Mortgage Insurance is a one-off cost that protects the lender if you default on your loan. It usually applies when your deposit is less than 20 percent, though some schemes waive it.
