By Zoe Short, Finance Broker
Buying your first home is an exciting yet daunting time for all first-time buyers, but it can be more accessible when you have the proper support.
At Business Initiatives we see many first home buyers, and we want to make the experience of purchasing your new home as easy as possible.
We have answered the most common questions that a first home buyer usually have.
Q. How much deposit do I need?
A. The amount of deposit that you need depends on the value of the property that you are purchasing. Most lenders will lend up to 95% of the property value. However, if you borrow over 80% of the property value, you will be subject to pay Lenders Mortgage Insurance (also known as LMI). Lenders Mortgage Insurance can either be paid upfront or added to your loan amount. If you choose to add it to your loan amount, your loan will need to remain under 95% of the property value.
Q. What is Lenders Mortgage Insurance (LMI)?
A. Lender’s Mortgage Insurance is a non-refundable premium that’s payable by the borrower if their loan exceeds 80% of the property value. The purpose of Lenders Mortgage Insurance is to provide the lender with protection against loss of income if the borrower cannot repay the loan.
Q. What is Stamp Duty?
A. Stamp Duty is a tax payable on the purchase of the property. Stamp duty is calculated based on the purchase price and location. Different States and Territories charge different amounts of Stamp Duty.
First home buyers should keep this in mind when saving a deposit.
Q. Will I get the First Home Owner Grant (FHOG)?
A. The First Home Owner Grant is different in each State and Territory.
To find out if you are eligible, it is best to visit http://www.firsthome.gov.au/.
This site will provide you with all the relevant and up to date information for your State or Territory.
Q. Can my parents help me?
A. If it is suitable, yes. If your parents own their home unencumbered, you could look at a family pledge. A family pledge will allow you to borrow up to 105% of the purchase price of your property. The bank will secure 80% of your loan against your new property, and your parents’ property will guarantee 25%. Therefore, because you are only blocking 80% of the loan against your new property, you will not have to pay Lenders Mortgage Insurance. It is best to speak with your mortgage broker to see if this is a suitable option for you.
Q. Are there any other fees I should know about?
A. It is best to ensure that you do have additional funds set aside to cover your conveyancer, bank fees and any other small fees that you may incur. These will all be outlined to you by your conveyancer or mortgage broker.
Contact us at firstname.lastname@example.org if you have any further questions!