First Home Buyers’ Help
Buying your first home can be an exciting and highly rewarding experience, but the process can be daunting if you haven’t done a little homework.
This guide takes you through some of the key considerations around the financing of a property purchase, from saving a deposit, getting a loan, to ensuring you receive any government financial benefits available.
The Deposit for your first home.
The deposit is your down-payment or contribution to the cost of the property and the more you can save as a deposit, the less you may need to borrow. The financial discipline or budgeting required to build a substantial deposit is good practice to ensure you can manage loan repayments once you have a mortgage, and it also demonstrates your financial capacity to the bank or lender. Lenders will like to see proof of what’s known as genuine savings through your bank records, (in preference to receiving your deposit as a gift, or separate loan.)
Exactly how much deposit you need will depend on the price range of the properties you seek, and the amount of money you are planning, or able to borrow. A deposit of 5% of the property price is generally a minimum starting point, and the more the better. A 20% deposit is usually the minimum required to avoid paying the extra cost of Mortgage Insurance; which insures the lender, but not you, from a failure to pay the loan.
Borrowing capacity for first home buyers
Lenders assess your overall financial situation to determine how much you can borrow eg:
- Your income ( wages, salary, or from other investments)
- Current financial commitments ( credit cards, personal loans, etc)
- Credit history
- Number and ages of any children
- Size and Type of property ( urban or rural, house or apartment)
Each lender applies their own formula to this information to calculate what you should be able to repay, and thus what the maximum loan they can offer. AT we can advise you on your maximum borrowing capacity with over 20 different banks and lenders, so while you may not qualify for the loan you need from one lender, you may still receive an offer from another.
You can increase your borrowing capacity with the following measures:
- Save a bigger deposit
- Draw up a Budget – and stick to it!
- Pay off consumer debt like credit cards ( and reduce your card limits if possible)
- Consider consolidating any debts to a lower rate of interest
- Resolve any credit issues
First Home Owners Grant
In recent years, state and federal governments have offered financial assistance of lump sum payments to people buying their first home. The grant application is submitted at the time of your finance application, and funds are made available at settlement to help fund the purchase of the property. Eligibility guidelines apply:
- You or your partner must be an Australian citizen or permanent resident
- You ( or your partner/spouse) must not have previously owned a home in Australia
- Property must be owner-occupied, i.e. generally you’d need to live in it for at least six months, commencing in the first year of ownership ( with some exceptions)
- Property price limits apply, i.e. maximum of $835,000 in NSW
In NSW, this grant will be unavailable after 30 September 2012, and replaced with a more generous scheme, but limited to New homes only.
Link to FHOG fact sheet – scheme until 30/9/2012
What is the First Home Owner Grant NSW ( New Homes)
Eligible First home owners purchasing or building a new home in NSW are entitled to a $15,000 grant where the transaction commencement ( contract) date is on or after 1 October 2012. This grant is scheduled to drop to $10,000 on 1 January 2014 for contracts or commencements after that date. For additional info in the First Home Owners Grant view the FHOG fact sheet (01/10/2012).
Availability, conditions and value of First Home Owners Grants vary from state to state. Please refer to the following links for information applicable to your state or territory
Stamp Duty savings for First Home buyers
Stamp Duty is a tax collected by the state governments, payable by you as the purchaser, calculated as a percentage of the purchase price. It can add many thousands of dollars to your total purchase costs, so you need to factor this in to your purchase and borrowing budget.
In NSW, first home buyers are eligible for Stamp Duty exemption or discount if purchasing a brand new property ( i.e. never been lived in, off the plan new developments, or totally renovated properties). As of June 2012, only properties worth under $600,000 qualify for any discount or exemption.
At we can guide you through all these and any other aspects of the home loan process, to ensure you get the best loan plus any government benefits available. Our service is free and we specialise in ensuring we meet your individual needs.
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