The great Australian dream is very much alive.
In recent months there has been a surge of first home buyers into the property market, taking advantage of great government incentives and a low interest rate lending environment. If you have been thinking about finally owning your own home or are just tired of paying rent, now is an excellent time to take action. But don’t just dive in without first checking the depth of the water. Let’s make sure you know your numbers so that there are no surprises down the track.
YOUR DEPOSIT
We recommend at least 10% to get into your first home. For a $550,000 purchase, that’s a deposit amount of just $55,000. If you have more saved, great, you’ll save on Lenders Mortgage Insurance (LMI) and will likely get a better interest rate.
If your deposit is less than 20% of the value of the property, you’ll need to pay LMI. Depending on the lender, LMI premiums range between 1.5 – 4% and can be added to your loan. To the lenders, it’s all about risk. A larger deposit represents a lower risk to the lender, consequently you pay less insurance and will be offered a lower interest rate. So, should you wait until you have a 20% deposit, or make a move with your 10%? With the continued steady price growth in popular Melbourne suburbs, many first home buyers are realizing that it may be worth paying LMI as their property may grow conservatively at 3 – 5%, potentially paying for the LMI premium.
No deposit – You may be able to use the equity in your parent’s home to assist you in making a purchase. This is known as a family guarantee and is a popular option for parents to help their children secure their first home.
GOVERNMENT ASSISTANCE
The First Home Owners Grant (FHOG) is a great government initiative helping Australians buy their first home. If you are buying a newly built home in Victoria, a grant of up to $20,000 is available for first home buyers buying in regional Victoria, and up to $10,000 for newly built homes in and around Melbourne. The maximum purchase price of eligible new homes is $750,000.
First home buyers may also be eligible for stamp duty exemptions or concessions when buying their principle place of residence. In Victoria, a one-off duty exemption is available for homes valued up to $600,000, and a concession is available for homes with valued from $600,001 to $750,000.
OTHER PURCHASE RELATED COSTS
There are also some other costs to consider when crunching your numbers, they include:
- Conveyancing and legal costs (budget for about $1000)
- Title search and registration fees (for a first home purchase of $550,000 in Victoria, budget for about $1500)
- Pest and building inspections (budget for about $600)
- Home building insurance prior to settlement, and contents insurance when you move in.
Let us guide you through the entire process of purchasing your first home.
Get in touch with Your Future First on 03 9362 1458 or email andy@yourfuturefirst.com.au
Please visit the Victoria State Revenue Office website for further details: https://www.sro.vic.gov.au/first-home-owner