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Exciting news for first home buyers

There’s nothing quite as exciting as receiving a shiny set of keys to your very own home. The thrill of knowing it’s all yours. The freedom to be able to do what you like with it. Nothing compares!

If you’re an aspiring first home buyer, the new First Home Loan Deposit Scheme may help you reach your homeownership goal sooner. Here’s what you need to know.

The First Home Loan Deposit Scheme explained

On the 1st January 2020, the Australian Government launched the First Home Loan Deposit Scheme. It provides a guarantee allowing eligible first home buyers on low and middle incomes to buy a home with a deposit of as little as 5 per cent (subject to their lender’s criteria).

Potential applicants can choose from a panel of participating lenders, which includes major banks and smaller lenders.

How many people can access the Scheme?

The scheme is capped at 10,000 places this financial year. A further 10,000 places will become available from July 2020.

In January, lenders registered 3,000 potential first home buyers under the Scheme. From the 1st February 2020, 7,000 additional places became available.

Who is eligible?

Key eligibility criteria include:

An income test (your taxable income for the previous financial year must not exceed $125,000 for singles or $200,000 combined for couples)

You must not have owned a property previously

You must be an Australian citizen

You must be aged 18 or over

You must have a 5 per cent deposit saved (if applicants have 20 per cent or more saved, they will not be eligible)

You must intend to live in the property (and move in within 6 months of the date of settlement or, if later, the date an occupancy certificate is issued). You must continue to live there for as long as your home loan has a guarantee under the Scheme.

You can check whether you’re eligible using this handy online tool. You can also find further information about eligibility here, or better yet, speak to us and we’ll run through the eligibility requirements with you.

Property requirements

To be eligible, the property you intend to buy must also meet certain requirements. For example, it must:

Be a residential property (as defined under the Scheme)

Have a sale price under the price cap for the location (for example in Melbourne the price cap is $600,000, while in Sydney it’s $700,000). You can find more details about the price cap values here.

Be bought by an eligible first home buyer under the Scheme, who at settlement date will be the sole registered owner/s of the property.

Be an established dwelling or a new-build dwelling purchased under a house and land package, a land and separate contract to build a home or an ‘off-the-plan’ arrangement that is financed under an eligible loan from a participating lender.

You can find further information about property requirements here.

Are all home loans eligible?

No. There are certain rules about the type of home loan which can be accessed under the Scheme.

For example, you must take out a principal and interest loan (exceptions may be granted to borrowers constructing a new dwelling) with a term of 30 years or less (with no changes to loan terms). You must use all of the proceeds for the purchase (or towards the purchase and improvement) or construction of the eligible property, and your loan commitment must not be less than 80 per cent of the value of the property, nor more than 95 per cent.

Talk to us about your plans and we’ll explain the home loan requirements.

Next steps

Ready to buy your first home in 2020? We’re here to help!

If you’d like to find out more about the First Home Loan Deposit Scheme and other incentives available to you, please reach out. We can walk you through the eligibility requirements and lodge your application with a participating lender on your behalf.

Remember, now is a great time to buy property. Housing affordability has improved in many markets, some lenders have dropped their mortgage rates and home loan servicing rules have relaxed. Start 2020 with a BANG – with a property purchase!

To move or improve? Deciding what’s right for you

For most of us, it’s easy to form a sentimental attachment to our home. However, there may come a time when we either outgrow the property or would like to make changes. Sometimes these circumstances can make it difficult to decide whether to relocate or renovate.

Here are some of the key considerations to ponder before deciding which option is right for you.

Ask yourself:

How do you feel about your neighbourhood? Are you attached to it and do you want to stay put?

What’s your budget? Can you afford to buy a new home, or would a renovation be more suitable, given your financial situation?

What are your motivations? If a lack of space is the main issue, for example, you may be able to reconfigure the layout to free up more room.

To help make your decision a little easier, here are some of the pros and cons of renovating versus moving to a new home.

Improving your home

Pros

Remain in the neighbourhood you know and love.

Potentially increase the value of your property.

Avoid the costs of selling and purchasing a new home. These include real estate fees, stamp duty, legal costs, establishment and bank fees, as well as moving costs.

Access funds in different ways to finance the renovation, including potentially using any existing equity to pay for it.

Renovate your home to your exact liking and at the same time, improve your lifestyle.

It may be more affordable to renovate rather than relocate because of the aforementioned buying and selling costs.

Avoid the property hunt.

Cons

Renovating can be disruptive. You may need to move out temporarily, which could be costly.

It can also be time-consuming, particularly if you’re doing some of the improvements yourself.

There’s the potential to overcapitalise. This is when you improve a property beyond its resale value.

Council restrictions may dampen some of your renovation plans.

Moving to a new home

Pros

The excitement factor! A fresh start in a new home in a new location.

The convenience of moving into a property with the exact features you want and being able to enjoy the property straight away.

Avoid the trials and tribulations of a home renovation, such as having to deal with potential delays, managing contractors, and making decisions on every detail.

An opportunity to declutter.

Cons

The selling and purchasing costs can add up. There are also moving costs to consider.

If you’re relying on the proceeds from the sale of your existing home to buy your next one, you may also need bridging finance, which can be pricey.

The stress of finding the right property in the right location.

The upheaval of packing everything up and moving.

The verdict

So, after all these considerations, should you move or improve? At the end of the day, the decision is deeply personal. It ultimately depends on your individual situation and aspirations.

Whatever you decide, we can help you obtain the finance you need to achieve your goals.

If you’re keen to renovate your property, you may be able to refinance and unlock the equity in your home to bring your renovation plans to life. There are all sorts of other finance options available, so speak to us about your goals.

If you decide sell, we can help find a home loan that suits your specific financial situation and goals. We can organise bridging finance if required and walk you through the entire home loan application and approval process. Please get in touch – we’re here to help!

Why it’s a good idea to get pre-approval

You may have heard it’s important to get a home loan pre-approval. But why do you need it?

Pre-approval confirms you’re eligible to apply for a home loan up to a certain amount. Essentially, the lender checks your financial circumstances to decide if you’ll meet their criteria and can afford to repay a mortgage. It is also a recommended first step to your property search because of the numerous benefits it can give you.

Benefits of a home loan pre-approval

Confirm your borrowing power

Before you start searching for a property, it’s important to confirm your borrowing capacity. Online calculators can give you a general indication of what you might be able to borrow given your income and savings. But they don’t confirm what size repayment you’ll be able to make after you meet your other living expenses and financial commitments.

With a loan pre-approval, you’ll know exactly how much you can afford to pay for a property. It gives you a solid understanding of your finances and a clear spending limit. Getting pre-approved through a reliable broker (like me) can also help identify possible issues that you may not be aware of, as well as spot something that may have been overlooked.

Save time on the property search

Imagine spending a lot of time looking for your dream home, only to be rejected because you can’t secure finance. Getting a pre-approval will confirm how much you can borrow and help you save time, avoid wasted effort looking at properties you can’t afford, and prevent disappointment.

It gives you a competitive advantage

In a competitive property market, it’s important to move fast. Sought-after properties sell fast and having a pre-approval allows you to make an offer as soon as possible. Pre-approval gives you the ability to make an offer on a property on the spot, with the confidence of knowing you’ll be able to get the finance organised quickly. It also signifies to vendors that you are the real deal. If you are bidding at an auction, a pre-approval also helps you negotiate from a position of strength.

It protects your deposit

Before you hand over your deposit money, it pays to make sure you can get the home loan you need to complete the purchase. If there is some issue with your eligibility or a lender won’t approve the amount you need, you could potentially lose your hard-earned deposit.

Pre-approval gives you an important financial safeguard. And if you’re buying at an auction, pre-approval is particularly important because your deposit is non-refundable. Once the hammer goes down and you’ve made the highest bid, you’ll be locked into the purchase. For that reason, we recommend you make sure your finance approval is rock solid first.

The property must also get evaluated

Once you find the right property, you’ll still need to make a formal loan application to the lender. As part of this process, the lender will require a valuation of the property you select. Aside from confirming a budget for a home loan, it is also important to confirm if the loan will be approved by the lender for the property you chose. This is an important step as there are some properties that may not be acceptable to some lenders for the following reasons: if it is remotely located, its value is not enough to back the amount of the loan, or the location is ”risky”, among other concerns.

Apply for a loan pre-approval today If you’re ready to start your search for a new home or investment property, get in touch with us today so we can arrange your pre-approval. We will help you understand the process, which will allow you to shop around for your dream property with confidence.