Understanding and navigating your way through buying your first home can be challenging and often a scary experience. As a mortgage broker, we are here to help to make the process smooth and offer you different options and a range of products from various lenders, whilst aiming to reduce the stress for you!
Savings are an important component of securing a home loan, especially as a first home buyer. Most banks require at least a 5-10% deposit but the more you have saved the better, as it means you pay less Lenders Mortgage Insurance (LMI) which can be quite expensive. LMI occurs when you borrow more than 80% of the property’s purchase price, which can be avoided by having 20% saved to contribute as a deposit. There are also other ways to avoid paying LMI through the First Home Guarantee (FHG) which is a Federal Government Scheme, where the Government acts as the mortgage guarantor. Whilst they are acting as a guarantor, they do not own a portion of the property so this is the preferred option as opposed to the state government scheme where they own a portion of your property, so steer clear of the state government scheme, please!
There are other schemes that first home buyers get access to, which provide assistance in securing their first home. There is the First Home Owners Grant (FHOG) where you can get a $10,000 grant from the Federal Government, which is linked below for further reading on the terms and conditions. There is also an option for your parents to act as guarantors, in this option they put their home up as additional security to ensure that the amount borrowed is under 80% but this is an option that must not be taken lightly. The borrowers and the parents must be extremely comfortable doing this, as the guarantor is liable for a portion of the loan.
Whilst these schemes are available for first-home buyers, a significant component of securing a home loan is your borrowing capacity. This is based on your wage, other loan repayments & living expenses, the bank then assesses your ability to borrow using these circumstances. Recent rises in interest rates have lessened people’s borrowing capacities so keep a close eye on what you can afford if it’s been a few months since you last checked your borrowing power with your broker. The calculator section of our website can give you an idea of your borrowing power and estimated loan repayments. With that being said, it is easier than you think to get a loan as a first home buyer!
Calculators – https://www.bendigomortgagebrokers.com.au/calculators/
First Home Guarantee – https://www.nhfic.gov.au/what-we-do/support-to-buy-a-home/first-home-guarantee/
First Home Owners Grant – https://www.sro.vic.gov.au/first-home-owner