There’s plenty of people out there who don’t realise there are many ways to buy their first home so this one’s to all those first home buyers that are not familiar with the 3 main options when it comes to buying a property.
Option 1 – What I call the Traditional Method – Save save save…
This is where you work very hard and have a deposit, this usually takes many years as the higher the prices are the bigger deposit you need. How much deposit needed will vary from lender to lender but here are some simple rules to go by when buying a house to live in (not investment):
- Zero deposit will get you nowhere
- 5% deposit will get you in with very few lenders, you will have to pay a hefty LMI (lenders mortgage insurance) fee though
- 10% deposit will get you in the market with most lenders, you will still have to pay the LMI fee but it won’t be quite as much
- 20% deposit is as good as it gets, banks love this and will reward you with lower interest rates, more options and you won’t have to pay any LMI at all.
Option 2 – Build a new home and take advantage of the Government Grants
Often the government has grants available to help first home buyers with their deposits if they build a new home, this will vary quite a bit from state to state. I’ll cover off the grants in another blog shortly.
Here are some important things to look at with this option:
- Grants are usually only for buying land and building a new home or buying a brand-new home that has never been lived in
- You should visit your local states grant website to see if you qualify – if you or your partner have ever owned a property you will most likely not qualify
- There are costs during construction you need to consider, you will need to keep renting and pay some loan interest while the house is getting built…
- The same deposit principles as option 1 apply, but that extra $10 or $20k the government gives you will help in a massive way…
Option 3 – My favourite, getting help from mum & dad – They use their property as your deposit
This option is becoming super common with houses getting so expensive. This one can allow you to buy a house with ZERO DEPOSIT. Yes, that’s right, you don’t need to have any money saved, however I recommend you get saving first even if to prove to yourself you can afford to own property…
Pros for this option:
- You can get into a property without having a deposit saved
- You won’t need to pay LMI, this often saves around $5,000 – $12,000 straight up
- Your parent’s property would be putting up a 20% deposit, this means you can access the lenders best deals
- Some lenders will even let you consolidate (pay off) some other debt with this option so your cash flow remains healthy
Cons for this option:
- Mum & Dad and their property will be accountable for your actions. If you screw up the bank will come to them to fix the situation
- There are eligibility requirements for Mum & Dad, we can check these out for you in about 30 seconds
- That’s about it!
All the above options can work well if they fit your circumstances, I often find people would rather not use Mum & Dad but when they see the massive benefits many of them decide to ask the question. I will always arm clients with all the info they need and guide them through these options in much more detail before they decide on a strategy.
If you would like anymore info, feel free to send me a message, call me or email me anytime, I’m always happy to help.
In fact, I often help first home buyers plan way before they buy a house because without a plan how are they supposed to get ready…???
Yours truely – Quinto White – Your Awesome Mortgage Broker – 0407 577 792
