First home buyers
Get all the facts and figures
Buying your first home is one of the biggest and most exciting financial moves of your life, but it pays to look into all the opportunities and pitfalls very thoroughly before you start. Your professional ITP Home Loans advisor can talk you through becoming a first home buyer in Australia today, and help you choose the home loan type and interest rate for your situation.
How much can you afford?
Housing prices of course vary greatly depending on where in Australia you live. But two basic questions stay the same. How much can you afford to borrow, and how much can you afford to repay?
Your borrowing limit will be calculated on your income, assets, liabilities (debts), financial obligations, credit worthiness, loan type, savings and residential stability.
Getting loan pre-approval is invaluable, especially in an auction situation. You’ll be sure of your purchasing ability, and limit, right from the start.
How much can you comfortably repay?
Not overcommitting yourself on your future mortgage repayments should be more of a consideration than the actual amount of money you can borrow. So it’s vital to work out a realistic budget of your incomings and outgoings, making allowance for unexpected financial and life events. Plus it’s a good idea to budget for some spare funds to be left over after you’ve paid your monthly mortgage and other bills.
Home loan deposits – why size matters
Regular savings deposits, even on-time rental payments, are very helpful in convincing a lender of your capacity to meet your loan repayments. Most lenders will want to see that you’ve genuinely saved at least 5% of the cost of your new home. These factors, along with your total income, allow lenders to work out how much they’re prepared to lend you. The amount of your deposit can also affect the interest rate on your loan – a bigger deposit means you’ll be able to negotiate a better rate and have a wider selection of lenders. Not forgetting, of course, the fact that the less you borrow, the less interest you’ll pay over the life of the loan.
What about Lenders Mortgage Insurance?
The Loan to Value Ratio (LVR) is the equation lenders use to work out how much of a risk your intended loan may be. The higher the ratio of the amount borrowed in relation to the value of the property, the riskier the loan is to the vendor. If you’re wanting to borrow more than 80% of the cost of your home, you’ll generally be required to pay Lenders Mortgage Insurance (LMI). This is to insure your lender should you default on the loan.
However, there are ways to get around paying LMI. The most popular of these is when your parents or other family members use their own home or other equity as collateral for a guarantor loan for your home purchase.
First home buyers grant
If you’re buying your first home you may well be eligible for a government first home owners grant. There can sometimes be substantial sums involved, but the amounts and eligibility criteria vary from state to state. Your ITP Home loans advisor will be able to advise you of your situation, but in the meantime check out the grant conditions for your state or territory.
How are gifts of money treated?
If you’re one of the many first home buyers who are lucky enough to get money given to you by parents or other family members towards your purchase, here are some facts to remember:
- Lenders will want proof that this is a gift – that you’re not expected to pay back the money
- Most (but not all) lenders will need the money to have been held in a savings account for at least three months, as proof of savings
Similarly, shares, term deposits and inheritances will probably also need to be held for three months or more.
The path to becoming a first home owner can be quite complex, so it’s best to get the most appropriate advice from the beginning. Your professional ITP Home Loans Broker can help you secure the most suitable first home buyers loan for you, at the best rate. And all, of course, at no cost to you. So wherever you are in Australia, if you’re thinking about buying your first home, get in touch with us today. You can email us, or make an appointment to see an advisor face to face. Alternatively, give our helpful ITP Home Loans consultants a call today on 1300 387 487.