This is where we come in! At Organic Home Loans, we take the stress out of the equation for first home buyers. We help you by laying out in simple terms all the paperwork and financial information you need to have the best shot at success. We are also here to answer all those questions you might have. We can assure you – you will have questions!
Most lenders like to see that you have at least a 10% deposit saved for your first home. This shows you have a good savings history and will also lower your Loan to Value Ratio, or your LVR (we’ll get to that in a moment). The smaller your deposit gets the higher the restrictions will be, and you will need to pay Lenders Mortgage Insurance (which we’ll also get to). So all-in-all, the higher the deposit you have, the better off you will be. The banks will view it favourably and it will also reduce your ongoing repayments and interest on the full loan amount.
If you do not have the required 10%, some banks my accept a deposit of 5%. However, banks are tighter on their lending criteria so this factor alone may reduce the number of lenders available to you.
If you have no deposit whatsoever, family member/s such as your parents, may opt to be guarantors for your loan. This itself comes with more conditions (such as your family member being responsible for paying out your loan in full if needed).
When applying for a loan, lenders will look at the Loan to Value Ratio (LVR). The LVR is calculated by dividing the loan amount by the value of your home. The lower your LVR the better, because once your LVR drops below 80% you will not be required to pay Lenders Mortgage Insurance (LMI). Lenders Mortgage Insurance protects the banks if you default on your loan. The higher your LVR (or the smaller your deposit is), the higher the Lenders Mortgage Insurance premium, so it is always best to have the biggest deposit possible to save on these added costs.
When buying a home, there are fees that aren't included in the purchase price of your property.
Fees can include:
Eligible first home buyers can get the First Home Owners Grant to assist in buying their first home. Read more about the First Home Owners Grant below.
The Federal Government currently has three different schemes or grants available to assist Australia's First Home Buyers own their home sooner. Each state has adopted the schemes and grants to be in line with their property market and even to encourage growth in certain areas.
Keep in mind each state's requirements and provisions differ.
Up to $20,000 in your pocket sounds great! Under this grant the Federal Government is encouraging first home buyers to enter the property market with the incentive of a once-off grant which can be used towards your settlement, your construction or you can receive it after you settle. Each state has individual requirements based on largely their property market or the location of where you purchase.
Generally speaking, each states eligibility criteria will require:
Did you know, if you are to purchase a brand new home in Melbourne City and meet Victoria's eligibility criteria then you could receive a $10,000 grants, but, if you were to purchase in regional Victoria you could be entitled to a $20,000 grant!
Stamp duty can be a hefty fee that First Home Buyers have not prepared for or if they have it has greatly reduced how much they can buy for, as an example, a house worth $700,000 carries a stamp duty of almost $27,000 for those who want to live in NSW.
Under the Stamp Duty Exemption or Concession if you are buying your first home you may be able to avoid paying any stamp duty if you and the property you would like to purchase meets the requirements and restrictions set out in your chosen state.
The FHLDS came into effect in January 2020 and it is the Government's latest initiative to assist 10,000 Aussie first home buyers each year purchase their first home sooner.
In normal circumstances, if your loans LVR is above 80% you will almost always be liable to pay lenders mortgage insurance (LMI) which can often add thousands to your upfront costs or loan repayments. Under the new scheme eligible borrowers will be able to purchase their home with only a 5% deposit (plus costs) and pay NO LMI.
What does this mean for your pocket? If you were to purchase a property worth $700,000 in NSW with only a $35,000 deposit (5%) most lenders will require you to pay roughly $34,000 in LMI which is normally added onto you loan meaning higher repayments. However, under the FHLDS with only a 5% deposit your LMI will be $0!
The First Home Owner Grant (FHOG) is designed to assist first home buyers to enter the real estate market as an owner occupier. It is a one-off grant to assist you in buying your first home. Each state and territory funds its own scheme, which means there are different criteria for the grant in each state or territory, dependent on where you are purchasing the property. You can view the complete set of guidelines for the grant in your state at First Home or via the links below:
Each state and territory has a different First Home Owner Grant. The grants can vary depending on whether you are buying a new or existing home as well as the location. For example, buying in regional Victoria can give you access to a further $10,000 in an attempt to encourage moving to regional cities as opposed to inner city living. Check the applicable link above for your state or territory guidelines.
Similar to the grant amount, eligibility criteria will differ from state to state. However, in all states and territories you will find the below general criteria apply:
Your lender will act on your behalf when applying for the First Home Owners Grant. Our home loan experts can also assist you with the paperwork you will need in order to apply.
Visit your designated office in your State or Territory to download the required application form.
When applying for the grant, you will need:
Grants are paid out at varying times depending on your location and whether you are buying, building or are an owner/builder. When buying, they are generally paid out upon settlement. When building, the grant can be paid out at either the first progress payment stage or when foundations are laid. If you are an owner/builder, the grant is often paid when a certificate of occupancy is obtained. Check your state or territory guidelines.
At Organic Home Loans, we are here to assist you in making the process of securing a home loan for first home buyers a straightforward one. We cut through the red tape and provide you with the facts. The more informed you are about banks’ expectations and requirements, the greater your chance of a successful outcome.
Let our home loan experts help you with the purchase of your very first home.
