Saving a Deposit Isn’t the Most Stressful Part in First Home Buying

How Much Deposit Do I Need?

In years gone by, banks used to offer 100% loans, but nowadays, these options are very rarely found. Many people come to find that if they have savings of around $15,000 to $25,000, they can usually proceed with talking to a mortgage broker or lender. This does require them to make up any difference which can be sustained by partnering up with a family member, or getting money as a gift from parents and having a family member to be a guarantor, if necessary.

Deposit

Great Tips:

  • Lower your Credit Card/Personal Loan Debt (including any store card debt)
  • Cut Down on Takeaway
  • Go out Less
  • Spend Less on Luxury Items
  • Cut Down Expenditure
  • Have a Budget and Stick to It (Income minus expenses)

The rule of thumb for the amount of deposit required was 20%, but now some finance organizations may, in fact, lend you 95% of the value of your home. That means you only need a 5% deposit for some areas. So, if you currently have a 5% deposit, this could be enough to sway lenders to finance the purchase of your home. Location and zoning will be factors here. Residential and country denote different requirements.

Example: If you had to find a deposit for a $300,000 property, you would only need to find $15,000. If you saved $1000 per month, then, in 15 months you would have your deposit! That seems possible if you have a real plan set in place.

If you have a sum which is larger than this 5%, it is more beneficial to you as it will reduce the risks to lenders – which means they will look more favorably on you. This is due to your LMI payment being substantially reduced. This LMI “Lenders Mortgage Insurance” is a one-time insurance payment that is required for any home buyers who have less than a 20% deposit to put down.
First Home Australia offers many house and land packages. Our professionals can also advise you on using the First Home Buyers grant as part of your deposit.

No Deposit

A few people have followed this route and have been able to purchase their first home with no deposit at all, although this does require a little forethought.
Around 60% of first home buyers have some form of assistance from their parents when purchasing their first home, this frequently comes in the shape of a guarantor loan and with this, you can usually ensure:

  • 110% of the property value can be borrowed.
  • LMI will be avoided.
  • Extra costs of stamp duty, mortgage set up costs and any legal fees will be covered.
  • Interest rates can be lower.

It is also possible to receive the deposit amount as a gift from your parents, although lenders can restrict some of the options available to you if this route is followed.

The professionals at First Home Australia can help you find the best solution to overcome the deposit dilemma, and you may just find that a simple solution requires much less than you thought. You can check with a broker or contact us and we can steer you in the right direction, too. If you are eligible for government grants then you won’t need to save as much for your deposit. Take the worry out, and call us!

How to Deal with Loan Defaults

If you fall behind on your mortgage payments, it is not the end of the world, but it does require you to take action, sooner rather than later. Sometimes there are challenges, but they can be dealt with through great communication.

In any situation, the first thing you have to do is to contact your lender. They can, in most instances help you more than you think. It may be a case of changing the term length of the loan or restructuring it to allow you to make payments easier.

When you find yourself in this situation, it is imperative that you act quickly, because behind the scenes, your lender will have procedures in place that they will already be looking at, and if the worst comes to the worst, they will, in fact, be seeking to repossess your home. So, get on it early. Don’t leave it, call them at the first sign of difficulty.

Things to Consider

Making a repayment arrangement with your lender – this is where you would speak to your lender and seek financial guidance to work out a new budget. This has to be realistic, and if you find that no matter what option is on the table you cannot afford it, you may have to consider selling your home as the only option.

Calling or writing to your lender – lenders have financial hardship teams in place. When you speak to these, record or keep copies of all conversations, you have. You can show these teams your repayment arrangement and ask if there is a possibility you can extend the term of your loan.

Statements of financial position – these documents allow your lender to see if you are capable of making your repayments instantly. This document, you should complete with the assistance of a financial counselor as you have to ensure that all of your necessary expenses are included to make the document realistic. If you get this wrong, it can be a case that your lender rejects your application.

Other Options Available

  • Catching up with repayments.
  • Changing the loan terms.
  • Consider downsizing to a cheaper home.
  • Interest only option.

If your repayments are affected due to illness or unemployment, check your insurance policy to see if you have these included. You could find that you are worrying about something that is covered for a period.

If your utility bills are the area that are causing you problems with making mortgage payments, you can speak to these institutions also, and they should be able to help in this situation. So, then, this could allow you to catch back up your mortgage payments or to ease the burden and not fall too far behind.

How Much Deposit Do I Need?

In years gone by, banks used to offer 100% loans, but nowadays, these options are very rarely found.

Many people come to find that if they have savings of around $15,000 they can usually proceed with talking to a mortgage broker or lender. This does require them to make up any difference which can be sustained by partnering up with a family member, or getting money as a gift from parents and having a family member to be a guarantor, if necessary.

Deposit

The rule of thumb for the amount of deposit required was 20%, but now some finance organizations may, in fact, lend you 95% of the value of your home. That means you only need a 5% deposit for some areas. So, if you currently have a 5% deposit, this could be enough to sway lenders to finance the purchase of your home. Location and zoning will be factors here. Residential and country denote different requirements.

If you have a sum which is larger than this, it is more beneficial to you as it will reduce the risks to lenders – which means they will look more favorably on you. This is due to your LMI payment being substantially reduced. This LMI “Lenders Mortgage Insurance” is a one-time insurance payment that is required for any home buyers who have less than a 20% deposit to put down.

First Home Australia offers many house and land packages. Our professionals can also advise you on using the First Home Buyers grant as part of your deposit.

No Deposit

A few people have followed this route and have been able to purchase their first home with no deposit at all, although this does require a little forethought.

Around 60% of first home buyers have some form of assistance from their parents when purchasing their first home, this frequently comes in the shape of a guarantor loan and with this, you can usually ensure:

  • 110% of the property value can be borrowed.
  • LMI will be avoided.
  • Extra costs of stamp duty, mortgage set up costs and any legal fees will be covered.
  • Interest rates can be lower.

It is also possible to receive the deposit amount as a gift from your parents, although lenders can restrict some of the options available to you if this route is followed.

The professionals at First Home Australia can help you find the best solution to overcome the deposit dilemma, and you may just find that a simple solution requires much less than you thought. You can check with a broker. Contact us and we can steer you in the right direction, too.

Where to Find a Good Home Finance Company

When you are looking to purchase your first home, the house and land package choice can be the easiest part of the whole process, and the hard work comes when you are looking for the ideal lender.

What Lenders Look For:

These lenders review vast amounts of information regarding your credit history and regular savings along with your annual income.

For many people looking to purchase their first home, it can be difficult to meet all of these requirements easily, and this, in turn, can make it nearly impossible to be in a position that you can actually purchase your first home. If you decide to save, the chances are property prices have also risen in line with any savings you have managed to make, and this will leave you in the same position as when you started. And for many, this will mean extra rent has also been paid.

First Home Australia Solutions

First Home Australia has looked at these problems and come up with solutions that now make it much easier for first home buyers to purchase their first home.

One of the first things we decided to do was offer fixed priced contracts which leaves no hidden extras, so the price we quote is the price you will pay!

We then make the entire process of being eligible as simple as 1,2,3:

  1. Contact First Home Australia to obtain a preliminary qualification.
  2. Decide which house and land package meets your needs in any of the locations we cater to.
  3. Once you have received approval, our home specialists will guide you through the remaining steps of the process.

The Best Finance Solution

First Home Australia can be your ideal finance company as we deal closely with the developers and are ideally placed to offer the best deals available on our many thousands of house and land packages.

If you are currently renting, we are also proposing to pay rental charges for our clients until their home has had its construction completed and the keys have been handed over for you to take occupancy. We can also use any rental history you currently have, to go towards your proof of savings which will help with your financial application.

If you act quickly, you can also take advantage of the full government grant which is being offered along with the First Home Bonus Incentive. This can make purchasing your first home a breeze and much cheaper than you thought possible.

The Future of Queensland Real Estate Industry

The government is pushing for real estate construction to replace mining as a major form of economy growth. This leads to an increase in the number of investors who snap up property in prominent areas, which in turn helps to force up (not only land prices), but property and rental prices in these regions as well.

You may think it is only homeowners who are affected but many businesses also feel the effects of this. They seek alternative locations to base all, of or some of their operations. For them to do this, they need to look into the up and coming areas, where land prices are low compared to the more traditional areas.

First Home Australia has this insight, and already has 1,000s of house and land packages in these future up and coming areas.

Investment Opportunities

If you are looking at purchasing a new home, one of our prime locations may just be the thing for you to get on the property investment bandwagon. If you find you are eligible for the full government grant, the one stipulation is; that this property is your main home for a period of six months from the time you receive the keys.

Once this period is over, you can be free to use this first home as an investment opportunity. This ensures you use the full advantage of the grants and bonuses available when you deal with First Home Australia.

To achieve this in the current marketplace is nearly impossible, as most of the properties are established, and the prices are already high. So, keeping up with the demand increases. This can make it difficult, first to find a suitable property, or find a property which you can actually afford, realistically speaking.

Quality of Life

A house and land package from First Home Australia can give you the quality of life that is not possible in the more built up areas. Many of the areas are also located in suburbs which are clean and are ideal for raising families. Some of the locations are picture perfect.

First Home Australia can be the ideal solution for you to keep one step ahead of how the real estate industry reacts to the current housing price problems.

No Deposit Home Loans

It may have been a case a few years ago, that a 100% “NO” deposit home loan was available, but things change and it is no longer possible for these to be found easily without good proof of savings.

Although, if a person is creative enough, they may be able to find themselves eligible for a 100% home loan, but this would be subject to availability.

Here there are some tips of how you could achieve it:

105% Guarantor Home Loans

  • With these, you can borrow 105% of the purchase price.
  • It is not required for you to have savings.
  • Your parents must provide the lender a guarantee which is secured against their property.
  • This is currently the best and easiest way to purchase a property without a deposit!

A Gift

  • Some lenders will consider your loan application even if you have not saved the deposit yourself.
  • Is it possible for your parents to find 5% to 15% of the purchase price?
  • Around 60% of first-time buyers have assistance from parents.

Use a Personal Loan as Deposit

  • Is your deposit small, in the range of 3% to 5%?
  • Are you in a career which has a high income?
  • It is possible for you to borrow 95% of the purchase price, plus taking on a personal loan.
  • It is not possible for you to have over $10,000 outstanding debt.
  • Your credit history must be clear.

Equity in Other Property

  • Are you already an owner of another property?
  • Any existing equity can be used towards your deposit.
  • If your equity is large enough, it is not required for you to have savings.

Using Superannuation

  • Are you in possession of over $150,000 in superannuation?
  • It is possible for you to set up a self-managed superannuation fund which you can use to help purchase a property?
  • This property must be for investment purposes and not for living in.
  • You are eligible to borrow 80% of the purchase price.
  • Your superannuation covers the cost of your deposit, so no savings are required.

With all the options, available, it is still advisable to have professional advice, even with option number one which is the best way, because this puts an element of risk against your parents and not just you and your home.

It may be tempting to look at any of the options above, but the risks should be considered before jumping into a commitment that is difficult to get out of. Always seek financial advice from a reputable advisor.

Rental and Home Loans History

It may sound strange, but you can use your rental as a deposit on your new home. This can be done in one of two ways.

Rent to Buy

This is the first option and quite literally means using the rent you pay as your proof of being a good payer to purchase the home you are going to buy, if you go in this direction, the actual rent may be higher than the current rental rates which would be set for this type of property, yet the difference is actually used as your ability to pay over time.

The steps normally involved with this are the bank can use your rent to see you have a good payment history:

  • A rental contract between the two parties showing statements of payments, long-term.
  • Alternatively, you can purchase your rental home (if it’s for sale by the landlord), as a rental/purchase agreement. An option to buy the property in the form of a contract.
  • As an example, if the rent is $350 per week, and you agree to pay $500 per week, $150 of this will go towards the “option to buy contract.”

Over a couple of years, you could amass quite a bit towards the deposit and then use it to purchase the property. There are some pros and cons associated with this option:

Pros

The purchase price can be locked in while you are saving, an example being if the property was locked in for two years at $500,000 it would still be the same value at the end of the two years.

Your savings plan is defined by default, you are free to save more, but this difference cannot be avoided.

Cons

If for any reason, you decide not to purchase the property, you will forfeit any money which has been used towards your deposit.

The deposit can only be used for the property that you are renting.

Any maintenance charges will have to be paid by you, whereas in normal cases the landlord would pay.

If the landlord has financial problems, you are unprotected and could lose your deposit.

If the property value does not reach what was agreed to by the initial contract, it could be very difficult to get further financing.

It is wise to think about this option carefully, it can seem ideal, but most of what is set out is in favour of the landlord.

Rent as Proven Savings

When purchasing a property in Australia, the majority of lenders will ask for proof of savings, this should show a gradual increase in a saving account for not less than 3 months. Without being able to prove these savings, it is nearly impossible to get financing unless you can take advantage of the grants available, and the factors required to meet the terms. There are new loans on the market which will allow you to obtain a five percent deposit along with a well proven rental record, this rent then goes as proof of your savings.

With this method, there are a few catches you should be aware of:

In many cases, rent has to be over 6 months and in some cases, 12 months is required. Every single rental payment has to have been made on time, every time. A rental contract for twelve months or longer may have to be shown. Private rentals are accepted under consideration only, rentals through licensed real estate agents are fine. The tenants whose name is on the lease must be the same as the loan applicants.