If you’re struggling to qualify for a loan on your own, there may be other ways to secure your first home. Here are five popular strategies.
With property prices still high and rising in many major cities, the dream of home ownership can feel like it’s moving further out of reach for many Australians.
For savvy buyers, however, there are still plenty of ways to get a foot on the ladder. It may just involve thinking outside the box. Here are some ideas.
Buy with a friend or relative
The rationale of buying with a loved one is simple: You can split the cost of the deposit and loan, which makes it easier to both qualify for a mortgage with your customer-owned bank and meet the loan responsibilities.
If you choose to go down this path, it may be worth seeking professional advice to ensure you’ve got an exit plan and can prepare for unexpected events, such as one of you losing their job or getting sick.
Get a guarantor loan
Guarantor loans involve a third party – usually a parent, extended relative or friend – putting up their own asset as a guarantee against your loan. It gives the lender security in case the loan cannot be repaid for whatever reason.
While guarantor loans help borrowers who don’t otherwise qualify get a loan, they also come with risks for the guarantor. If you cannot pay back the loan, the lender can ask the guarantor to pay back the loan and if they can’t, they can repossess the asset.
Consider rentvesting
If you can’t yet afford to buy your perfect home, but may qualify for a smaller loan, you could think about rentvesting. The strategy involves renting a property to live in that suits your lifestyle goals (e.g., close to schools, family, friends), while also giving you the opportunity to own a property. Often, owners use the rental income they earn to pay off their loan, their own rental costs, and other property-related expenses.
One risk with this strategy is overcommitting – the costs may outweigh the income the property generates. For that reason, it’s important to do the sums beforehand.
Look farther afield
Regional cities and towns are growing at a rapid pace and often offer the same lifestyle opportunities as capital cities, at a lower cost. If moving is an option for you, you could consider a tree or sea change to a property market that hasn’t yet caught up to the likes of the major capital cities.
In the past, some buyers were concerned a move to the country could hamper their links to big city-based employers. But, in the post-COVID era, that issue has quickly evaporated, thanks to new technology and more flexible opportunities.
Take advantage of incentive schemes
Depending on where you plan to buy and live, there are a number of national, state and territory-based incentive schemes to help get you started. These include:
- First Home Owner Grant – A scheme funded by states and territories, where eligible first-home buyers planning to live in their property get a grant between $10,000 and $30,000.
- Help to Buy – A scheme set to arrive later this year in which the federal government offers eligible buyers a contribution of up to 40 per cent of a home’s cost, in exchange for proportional equity. Note: this scheme will be available only to a limited number of prospective homeowners.
- First Home Super Saver Scheme – A program that allows savers to build up their deposit within super while benefiting from tax concessions. Borrowers can save up to $50,000 in their super account and then withdraw it when they’re ready to apply for a loan.
- Other state and territory-based schemes – Each jurisdiction has a slightly different approach to helping first-time buyers, so it’s worth checking your state and territory websites to see what is on offer.