Buying a first home sooner
Saving for a deposit can be tough but there are ways you could fast-track your entry into the market.
Most lenders will only extend finance up to 95% of the property’s value, so you’ll usually need a deposit of at least 5%. If you want to avoid paying lender’s mortgage insurance, you may need to save at least 20% of the property’s value.
You may also have to budget for extra expenses such as stamp duty, transaction costs, conveyancing fees and removalist costs.
A disciplined approach to saving, can help you get there but you may be able to get into the market sooner.
ASK YOUR PARENTS OR SIBLINGS - If your parents are willing to help, you could ask them to stand as guarantors for the loan. This often allows you to get a mortgage with a smaller deposit, or no deposit at all. The guarantee can be limited to a certain amount and could be removed after you’ve built sufficient equity in your home. As guarantors, your parents are using their assets to back you so make sure you all fully understand the potential consequences.
BUY WITH A FRIEND OR RELATIVE - This could cut down on the amount you need to save as you’ll both be contributing to the purchase. You’ll each own part of the property and share in the mortgage repayments. Be sure to seek legal advice to avoid potential disputes down the track.
BUILD A DUPLEX – Take buying with someone else to the next level and build together. By building a duplex and then subdividing the land, you each could end up with your own home at potentially a lower cost. There are lots of factors to consider if you’re thinking of taking this approach. Check council zoning and budget building costs carefully. There will be costs including the subdivision, survey expenses, legal and application fees, but you may be eligible for a stamp duty concession.
BUY OFF THE PLAN – Governments are waiving stamp duty on newly built homes to encourage development. Buying off the plan also allows you to buy now and pay later. You’ll have to put down a deposit on the property when you sign to buy but settlement doesn’t occur until after your home is completed, giving you longer to save.
Quick tip: What works for you will depend on your own personal circumstances. Consider seeking financial and legal advice.
TO FIND OUT HOW RAMS CAN HELP EASE YOU THROUGH THE PROCESS, GET IN TOUCH WITH YOUR LOCAL RAMS HOME LOAN EXPERT OR DROP IN FOR YOUR FREE FIRST HOME BUYERS’ GUIDE.
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Disclaimer: Information in this material is general and does not take into account your objectives, financial situation or needs and you should consider whether it is appropriate for you. You should also obtain independent professional advice relevant to your financial circumstances.
