First Home Buyers – Home Ownership is Closer Than You Think

November 30, 2023


Becoming a first home buyer might feel like a pipe dream right now. With the media sprouting doom and gloom about mortgage cliffs and rising interest rates it’s easy to have a bleak outlook. But if you take a closer look, you’ll see that buying your first home may be closer than you think.

It could be that you’re not sure if you’re truly ready to put on that shiny ‘first home buyer’ badge. Or maybe you just don’t know what your options are. Either way, that’s totally okay. We’re here to demystify the process of buying your first home from start to finish.

Are you ready to become a first home buyer?

There’s a popular misconception that first home buyers these days need to dip into ‘the bank of mum and dad’ in order to make their home ownership dreams come true. But the reality is that the bar is a lot lower than you may realise.

If you meet the following criteria, then that’s a good sign that home ownership is not just closer than you think, but actually a very real possibility.

You’ve got a stable job

Lenders need to know that you can make regular, full repayments on your loan. Having a secure and stable 9-5 with a steady income is a solid indicator of your ability to pay throughout the life of your mortgage. You don’t need to have years and years of history with a single employer, but if you’ve job-hopped or if you’re a freelancer, be ready to go digging for your employment and income records.

Your debt is under control

Having less debt to your name gives you a better chance of securing a favourable mortgage. Lenders won’t expect you to have fully paid off your car loan or HECs debt. But they will require you to have enough of an income to keep up with all your debts, so it helps to minimise them before applying for a mortgage.

Your credit rating is good

A lot of Aussies aren’t even aware that they have a credit rating. But if you’ve taken out a credit card, paid utility bills or signed up for a mobile phone plan then you’ll have one. Whether it’s good or bad depends on your history of paying each bill on time and in full. A positive credit rating shows lenders that you’re dependable and capable of making regular repayments.

You’ve got a deposit saved

The typical figure thrown around for home deposits is 20% of the purchase price. Any deposits lower than 20% are riskier for your lender and will attract Lenders’ Mortgage Insurance (LMI) which acts as security money for them. Most guarantees and schemes will either help you meet this magic number, or allow you to secure a variable rate loan in line with a 20% deposit. 

Lenders will also want to see that you’ve saved up for the deposit in addition to managing your other expenses as it’s a good sign you can handle the financial demands of a mortgage. Plus, you’ll need to have saved up for other purchase costs — land tax, conveyancing fees, building reports — which in total can vary between about $4000 – $14,000 depending on the purchase price.

Financial assistance for first-home buyers

There are a number of schemes available to first-home buyers to help ease the financial burden of purchasing a home. But don’t get too excited yet. You’ll need to carefully consider the eligibility requirements for each, or get help from us as your mortgage broker to determine which is right for you.

National initiatives

Something you’ll see thrown around a lot here is the word “guarantee”. A guarantee is a promise by a third party to cover part of your loan if you fail to make a repayment. It essentially makes it less risky for lenders to give you a loan.

  • First Home Guarantee (also called First Home Loan Deposit Scheme) — The government guarantees part of your deposit, up to 15%.
  • First Home Super Saver Scheme — Save up to $30,000 by making voluntary contributions to your super that you can withdraw without penalty to use as part of a home deposit.
  • Family Home Guarantee — The government helps by guaranteeing part of the deposit, up to 18%. Only for single parents with at least one dependent.
  • Regional First Home Buyer Support Scheme — The government helps by guaranteeing part of your deposit, up to 15%. Only for first-home buyers intending to buy property in regional Australia.
  • Help to Buy scheme (also called Shared Equity Scheme, beginning in 2024) — The government funds some of the upfront cost of a home in exchange for equity in the property. The government contribution can be up to 40% of the cost of a new home or 30% for existing homes.

NSW initiatives

  • First Home Owner (New Homes) Grant — Receive $10,000 from the government to use towards your purchase of a new home valued under $600,000 or vacant land and build combined $750,000

Other financial assistance for first-home buyers

Instead of being managed by the government, these initiatives are offered by some, but not all, lenders. 

  • Family Security Guarantee — A family member can help you reach a 20% deposit by offering their own property as further security against your home loan.
  • Gifted Deposit Home Loans — Your parents or family member can front the deposit cost with a non-refundable gift of monies equal to 20% of the property’s value.

Feeling overwhelmed? We recommend reaching out to an expert, like us at Connected Finance, who already knows the ins and outs of every scheme, guarantee and other form of assistance. We’ll help you find the ones that are right for you, so you can purchase your first property sooner rather than later. All without the blood, sweat and tears of going it alone.

Appointments with Connected Finance come to you at no cost, so you don’t have anything to lose by booking a time to chat with our team and learn more about your home loan options.

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