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First Home Buyers
Buy your first home with minimal deposit at low interest rate is possible.
What is Loan to Value ratio?
Loan to Valuation Ratio (LVR) is the percentage of the total value of the property or asset that you’ve borrowed. For example, let’s say that you’d like to borrow $400,000 and the property that the applicant is using as security is valued at $500,000.
The LVR of the home loan would be calculated like this:
($400,000 loan ÷ $500,000 property value) x 100 = 80% LVR
How much deposit do I need?
The maximum LVR for first home buyers are 98% including the lender’s mortgage insurance at approximately 3%. This means you will typically need at least 5% deposit inc. FHOG.
What if I don't have 20% deposit?
1. First Home Owner Grant.
The First Home Owner Grant (FHOG) was introduced by the Australian Government to help Australian’s with their first home purchase.
You can find more information about the FHOG in your state using the links below.
Australian Capital Territory
New South Wales
2. Lenders Mortgage Insurance(LMI)
You might still able to borrow with LMI if you don’t have a 20% home loan deposit.
LMI is an insurance policy that some home loan borrowers need to pay for. The purpose of LMI is to protect the lender from financial loss if the borrower can’t afford to meet their home loan repayments. If the borrower defaults on their loan and the sale of the property doesn’t equal the unpaid value of the mortgage, lenders can claim on the LMI policy to make up the difference. Generally a lender will require you to pay for LMI if your home loan deposit is less than 20% of the total value of your property – so if your LVR is more than 80%. However, as different lenders may have different rules, it could be worth checking what each individual lender’s policy is. If you’re looking to avoid paying LMI but you don’t have enough of a deposit saved up, you may be better off not entering the housing market just yet, and waiting until you have saved up the 20% deposit that is generally required to avoid paying LMI. You could also consider the First Home Loan Deposit Scheme, if you are eligible.
3. First Home Loan Deposit Scheme(FHLDS)
The First Home Loan Deposit Scheme is an Australian Government initiative to support eligible first home buyers purchase their first home sooner. Under the Scheme, eligible first home buyers can purchase a modest home with a deposit with as little as 5 per cent (lenders criteria also apply). https://www.nhfic.gov.au/what-we-do/fhlds/
Is there any upfronts costs involved in buying a property?
1. Stamp Duty
Stamp duty is a tax that is levied against sales of property and transfers of land, and can have a significant impact on your home buying budget. It’s charged by both state and territory governments and varies depending on where you live and whether the property is an investment or owner-occupied. Stamp duty is due within 30 days of settlement on your property, so you’ll want to make sure it’s included in your budget when you’re looking for a home.
If you are a first home buyer, you may be able to save money with first home buyer stamp duty concessions. Currently, every state offers concessions for first time home buyers, although they vary from state to state.
--Link to STAMP DUTY CALCULATOR
A solicitor provides the following services when you are buying a property.
Checking the Contract of Sale
Being the liaison between yourself and the lender's solicitor
Check all rates and taxes have been paid
Check land use or building approvals for the property
Order any relevant searches
Act as your legal representative for the transaction
An initial review of a Contract for Sale may cost around $500, whilst the full process to settle a property, if you go ahead, is likely to be between $2000-$3000.
Building and Pest Inspections: if you choose to complete these inspections prior to purchase, this may cost upwards of $500 (depending on the size of the property and complexity of the inspections required).
Home loan set up costs/bank fees. Our Home Finance Manager can help you with this as this depends on the loan type.
How do I get started?
Even if you haven’t found your dream property yet, ‘pre-approval’ helps you to understand the maximum amount you will be able to borrow from the lender without a valuation of a property.
Applying for a pre-approved loan is a great way to understand of what your repayments may be, depending on the type of property you are looking at and the type of loan you are applying for. Your mortgage broker will be able to take you through the details of this.
It also can give you the confidence needed to make an offer when you find a property that you are interested in. When you’re ready to make an offer or bid on a property, a loan pre approval also helps to let real estate agents and sellers know you’re serious, and may help put you in a better negotiating position over other buyers who haven’t obtained pre approval.