FIRST HOME BUYER GUIDANCE INFO
I would like to congratulate you for taking the step in preparing to buy one of your biggest investments - your first home!
First of all, there are 3 things you will need to understand at the start:
Genuine Savings – in the eye of banks this is a total of 5% of funds/money you have saved over a period of at least 3 months in your own savings account. Generally, most banks require at least show 5% deposit to come from ‘genuine savings’ when you are applying for a home loan more than 90% of the current property value.
Loan Value To Ration (LVR) – this is the total loan/amount you borrow against the current property value which is shown as %. How to calculate LVR? (LVR) % = (Total Loan/Current Property Value) x100, for example; if you borrow $630,000 for a property valued at $700,000 - ($630K/ $700K)x100= 90% LVR. Normally, First, home buyers can borrow up to 95% to 97% LVR.
Loan Mortgage Insurance (LMI) – this is the insurance that protects the bank/lender when in a situation the home loan customer (you) have defaulted on its home loan. Normally LMI applies when you borrow more than 80% LVR. LMI is a fee that you as the home loan customer will pay – fees will increase the higher your % LVR goes.
How much Deposit do I need?
You will need at least 5-10% deposit from the property value. Having said that, the higher deposit the better. Please note: other costs involved when purchasing.
For Example: Property Price $700,000 20% Deposit = $140,000 without LMI or/ 5% Deposit = $35,000 Plus LMI fee required.
How much can I borrow from bank/lender? its usually called “Borrowing Power”
Here are considerations for banks when calculating your Borrowing Power/Serviceability.
Income – generally they accept full/part-time income in all, however; casual, over-time, and bonus will usually restrict this income. Other payments such as Centrelink, dividends etc may be accepted. Self-employed generally need 2 years of taxation, however, some may use director salaries with lender conditions.
Living Expenses – Lenders will always use the higher of your actual living expenses, Kids will also be factor-in. having said that normally lenders have their own minimum benchmark HEM (Household Expenditure Method).
Current Debts: such as your personal loans, credit card limit, HELP-debts, and buy now pay later debt can all be a factor-in when calculating your borrowing power.
Interest Rate Buffer- when calculating your borrowing power, each lender have their added-on buffer of on top of the current home loan interest rate to ensure you can still make your repayment in the event of an interest rate rise in the future.
Above are just some of the factors that go into calculating your borrowing power, as each lender/ banks have its own calculator which calculates differently following their product policy. I suggest speaking to your mortgage advisor – set up a consultation with us.
Do I Qualify For Government Grants?
First Home Owners Grant (FHOG – State Government)
FHOG was introduced in 2000 that provides a one-time payment to eligible applicants to help first-home buyers into their first home. Most state governments (except the ACT) offer first homeowner grants (FHOG) to help you achieve homeownership. www.firsthome.gov.au
Stamp Duty Concessions (State Government)
All state governments, except South Australia, have stamp duty concessions available for eligible first-home buyers. note: click on the hyperlink for more info.
Victoria’s first home buyer duty exemption, concession or reduction (for properties up to $750,000)
New South Wales (NSW) first home buyer assistance scheme (for properties up to $800,000). from 16 Jan 2023 first home buyer choice eligible First Home Buyers will have a choice between paying an annual property tax and upfront stamp duty.
Queensland’s first home concession applies to eligible first-home buyers purchasing a property valued under $550,000. Non-first-home buyers may be eligible for the home concession.
Western Australia’s (WA) first home owner grant recipients can also apply for first home owner duty concession for eligible properties.
Tasmanian first-home buyers can apply for the established homes duty concession for homes valued at $600,000 or less.
Northern Territory (NT) stamp duty concessions are available for eligible applicants buying a house and land packages.
The Australian Capital Territory’s (ACT) home buyer income threshold scheme assists eligible parties to avoid or reduce stamp duty, depending on their income.
Low Deposit, No Loan Mortgage Insurance (LMI) Schemes (Federal Government – NHFIC)
Furthermore, the Australian federal government introduced its low deposit and no mortgage insurance through the National Housing Finance and Investment Corporation (NHFIC). This can also fast-track homeownership to first-home buyers.
Note: LMI can save you between $4K to $35K depending on property price and deposit amount. Here are some of their schemes: click on link below.
1. First home guarantee: up to 35,000 eligible first-home buyer applicants this financial year purchase their first home with as little as a 5% deposit.
2. Regional first home buyer guarantee: supports eligible regional Australians to purchase their first home with a deposit of 5%, commencing on 1 October 2022.
3. Family home guarantee: assists eligible single parents to buy a home with a low 2% deposit.
First Home Super Saver Scheme
Another Government Scheme for the first home buyer is the First Home Super Saver Scheme.
In this Scheme, from 1 July 2018 first home buyers may apply to release their voluntary contribution, along with associate earnings depending on eligibility.
First Home Super Saver (FHSS) Scheme – the essentials factsheets
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Disclaimer: The information provided in this fact sheet is not legal, taxation or financial planning advice. It has been prepared without considering your specific needs, objectives and personal financial situation. Before acting on this information, we recommend that you consider carefully if it is appropriate for your needs, objectives and personal financial situation. All loan products are subject to lender criteria and approval. Fees, terms and conditions apply.