Written by Kodie Axelsen
Home is that place you where you can sink into your couch, drink a cup of tea and relax in the walls of your own space. Owning your own home has been a part of the Australian dream for as long as most can remember.
It is an exciting time! Some sacrifice the finer things to save their money and others have relatives happy to gift them their deposit to help contribute to their future. I have many conversations week on week about how to get into your first home.
The plus is there are more options other than just busting your butt saving and telling your mates ‘sorry I’m not coming out, I’m saving my money for the foreseeable future to buy a house.’
That was me by the way … work, work, work, save, save, save.
Now here’s the disclaimer: I am giving very generic options here, not stating exactly what any one can do as it all depends on individual circumstances. Please call me if you would like to discuss your situation and I can give you individual guidance.
To get into your first home you have a few options:
Save your do$h: You can save your deposit from your wages over to a savings account until you have the minimum amount required to purchase your first home. The general rule is you require a minimum of 5% that can be classed as genuine savings. Keep in mind you do actually require more
than this as there are additional costs that require payment when purchasing a home.
Obviously this figure is dependant on the price of the house you are wanting to purchase. The absolute minimum deposit requirement will incur the payment of lenders mortgage insurance. This is an amount that is a one off payment and can be capitalised to your loan amount and paid off over
the term of your loan. This also changes based on your loan amount and also your loan to value ratio(LVR).
The lower the deposit, the higher the mortgage insurance. It acts as a risk mitigate to the bank if they ever need to foreclose on your property as they are at a higher risk of losing money if your debt against the property is high. To be exempt from paying Mortgage insurance your require a deposit of a minimum of 20%.
Receive gifted funds towards your deposit: If you have an awesome person in your life willing to gift you money towards your deposit for you home then high five! This is also an acceptable form of deposit. There are policies that surround using gifted funds especially if they are being used to make up your minimum deposit amount. These policies could affect the timeframe in which you can purchase. Please make sure you get the right advice to suit what you are trying to achieve to avoid missing out on a potential property.
Family guarantee: There is also the option to use the equity in a family members home to help towards your deposit. There is a lot more that goes into this but a basic explanation is that the bank will allow you to utilise equity in existing property that a family member owns to cover your deposit amount.
This also negates you from paying mortgage insurance as the bank will be fully covered by both properties included in the transaction. You can input a deposit if you would like, but this is not required as the equity can cover your deposit plus any costs involved in purchasing. To mitigate the risk to the guarantor there are two separate loans in this structure.
The guarantor is only supporting 20%(plus costs if included) of the total loan required. The guarantor does not have to support the loan for the life of it as there are strategies to be removed from this responsibility. As always, please have a chat with me if this is something you are looking to consider as a way of purchasing.
The market at the moment is strong and the rental market is becoming extremely hard to get into. If purchasing your first home is something you would like to consider please give me call and we can discuss the different ways you could make this a possibility. And remember, Don’t take advice from Joe Blow. I can’t stress enough how much buying a house is based on very individual circumstances. You’d be kicking yourself if you didn’t buy that house you loved because you thought it wasn’t possible.
As always, much love and happy house hunting!