While there are many well-publicised hurdles on the road to buying a first home, there’s also support available for Australians looking to get their foot onto the property ladder – from government schemes and lenders alike.
As a member of a customer-owned bank, you’re likely to find your credit union, building society or mutual of choice will be there to guide you through the process.
In the meantime, here’s an introduction to a few of the decisions you’ll probably have to make on your journey and where you can get help.
The deposit and lending criteria
Before you apply for a home loan, lenders will require a deposit as a form of security. While some lenders accept deposits of just a few per cent of the property purchase price, a deposit of 20 per cent is typically needed to avoid Lender’s Mortgage Insurance. LMI protects the lender if you default on your loan and generally costs several thousand dollars.
Beyond the deposit, lenders will also want to see evidence that you’d be a good borrower and can repay the loan. This may include payslips and employment history, evidence of your assets, and your record of repaying other debt. Having the right documents in hand before you apply can streamline the process.
The type of home loan
Once you have your deposit and paperwork sorted, you’ll also have to think about the type of loan you’d like. Options include:
- A variable-rate mortgage, where the interest rate – and, therefore, the repayment – tends to fluctuate in line with the Reserve Bank of Australia’s changes to the official cash rate
- A fixed-rate mortgage, where the rate of interest and repayment amount are frozen for a period of time
- A split mortgage, which is a combination of both of the above options.
Every borrower is different, so the choice you should make comes down to your personal circumstances. You can always discuss the pros and cons of the options with your lender or mortgage broker.
Government support schemes
As a first-time buyer, you may be eligible for extra support from either the federal or state/territory government. Generally, this depends on factors such as where you live, your income and assets, and what you intend to buy.
Here are a few of the schemes designed to help first-time home buyers.
- The First Home Guarantee is a Federal Government scheme available to 35,000 first-time buyers each year. It’s designed to help people get into the housing market with a smaller deposit (5 per cent) without paying LMI. The Government guarantees the remaining 15 per cent of the deposit to allow the buyer to avoid paying the insurance. The scheme has a number of eligibility requirements – for more information, click here.
- The First Home Owner Grant is a national scheme, administered by the states and territories, to help buyers avoid GST on their first homes. Grants of up to $30,000 are available, depending on where you are buying. There are a number of conditions, with many states and territories imposing caps on how much buyers can pay for a home. To find out what’s available in your state or territory, click here.
- The First Home Super Saver Scheme lets eligible, prospective buyers make voluntary contributions to super (beyond employer contributions), then withdraw them for a first-home deposit. Up to $15,000 a year can be deposited, then up to $50,000 – plus earnings – can be taken out for a down payment on a home. Again, there are a number of eligibility requirements, so it’s worth reading the fine print.
In addition to the government schemes, lenders have a variety of ways of helping first-time buyers get into the market. Your lender of choice can point you in the right direction.