Interest rates might be at historical lows. But there’s no doubt breaking into the property market has become harder, particularly here in NSW.
Housing affordability has hit first-home buyers hard, with median property prices in regional NSW rising 29.3% in the year to March, according to CoreLogic. So while it might be relatively easy to service a mortgage, saving a deposit can feel like an ever-moving target.
But you shouldn’t give up on the great Australian dream just yet. Here are four ways you can pick up the keys to your first home sooner than you thought possible.
- Take advantage of government first home buyer incentives
Both the federal and state governments recognise first-time buyers face huge challenges entering the market. So they have several first home buyer grants and schemes to help you get on the ladder a little quicker. These include:
- The First Home Owner Grant – a $10,000 payment to eligible first home buyers
- First Home Loan Deposit Scheme – in which the federal government guarantees up to 15% of your home loan. So you need as little as 5% for your deposit (without having to pay lender’s mortgage insurance)
- Stamp duty exemptions and concessions
- Get your parents to go guarantor
Asking your parents to guarantee your home loan can be another way of fast-tracking your homeownership dreams. That’s because the equity in their home can be used as additional security for your mortgage – so you might not need to save a deposit. And, in some cases, you might be able to borrow 105% of the purchase price. That said, there are risks involved – so make sure to speak to a broker first.
- Consider ‘rentvesting’
Love where you live but can’t afford to buy a property in the same location? Then you might want to consider rentvesting. This is a strategy in which you rent where you want to live while buying an investment property in a cheaper area. The rental income you earn can then be used to pay off your mortgage. You can also profit from any capital gains when it’s time to sell.
Read more about the pros and cons of rentvesting here.
- Pay lender’s mortgage insurance (LMI)
LMI is a one-off insurance payment you typically have to pay when you borrow more than 80% of a home’s value (i.e. your deposit is less than 20%). This insurance protects the lender – not you – if you subsequently default on your loan repayments. While it can add thousands of dollars to your upfront costs, LMI is not necessarily something to be avoided – particularly in a property market where prices are rising faster than you can save.
Looking to buy your first home but unsure about your options? Get the advice you need by working with Newy Finance.
Contact us by calling Jon Jones on 0410 699 969.