First Home Buyers
First Home Buyers
Buying your first home is an exciting time, but it can also be challenging if you don’t know where to start. For most people, a house will be the most important and expensive asset they will ever own. First home buyers know this but not many understand the process of settling the home of their dreams. If you’re a first-home buyer, your budget will be based on how much you’ve saved and the amount of money you can borrow.
Once you have determined your borrowing capacity, the next step is to assess how much deposit do you need, and the general costs involved in buying a property. Being aware of the different stages in the home buying process and knowing what to expect at each step can make it manageable and smooth. As mortgage brokers, we regularly see many first home buyers miss out on their dream home simply because they didn’t obtain a home loan pre-approval before they started looking at houses. Worse yet, panic stricken first home buyers approach us with looming settlement dates fearful they might lose their deposit.
To incentivize and encourage first home buyers, Australian government has introduced a grant for all the first home buyers. The First Home Owner Grant (FHOG) in Australia is a one off government payment designed to encourage and assist would-be first home buyers across the country to purchase a new property. The size of the grant and the eligibility criteria attached to it differ in each state and territory. In most places it is applied to first time property owners who are either buying or building a new home.
Launched in 2020, the First Home Loan Deposit Scheme (FHLDS) is a scheme by Australian government to partially guarantee some low-deposit home loans each year This requires deposit of at least 5% of a property’s value, which can help the borrowers avoid the cost of Lender’s Mortgage Insurance (LMI). This scheme covers, eligible first home buyers looking for a new or existing home. Check for your eligibility with us.
When you buy your first home, you may be eligible for Stamp duty exemption or concession depending on your scenario. Unlike the First Home Owner Grant, it doesn’t matter whether you are buying a new or established home.
Financing your first home involves two major aspects- adequate deposit and your financial standing (credit history/ salary). Below is a high-level overview of these steps and some important terms you as a would-be house owner should be aware of.
If you have a question that deals with clients, customers or the public in general, there is bound to be a need for the FAQ page.
Loan To Value Ratio (LVR)-Loan to Value Ratio (LVR) is the amount you are borrowing against the value of the property represented as a percentage. For example, if you are borrowing $450,000 for a $500,000 property that means your LVR is 90% of the property value. The higher the LVR, the higher the risk to the lender. Typically, first home buyers can borrow up to 95% of the property value (Based on eligibility criterias).
Lenders Mortgage Insurance (LMI)- Lenders Mortgage Insurance is an insurance that protects the lender in the worst-case scenario where you default on your home loan. LMI is typically applicable when borrowing more than 80% of the property value. LMI fees go up the higher your LVR is.
What is Genuine Savings Genuine Savings is basically funds that you have saved over time. In general, most lenders require that at least 5% of your deposit come from genuine savings when you are applying for a loan greater than 90% of the property value / LVR.
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