We get it. There’s nothing easy about saving for your first house deposit. Especially when you’re renting, paying off a HELP debt and trying to cover the increased costs of living. But you just really want to buy your own home.
The more cash you have saved, the more options you’ll have when it comes to buying your first home.
However, there are a few ways you could buy property now – even without a large deposit. We outline these options below.
Pay Lenders Mortgage Insurance
You don’t need to save 20% deposit. You can borrow a higher proportion of the purchase price/ property value, but lenders mortgage insurance will be added to your loan.
Many of the calculations you come across use a deposit amount of 20%, just to make the examples easier to follow. Having a 20% deposit means you can avoid paying Lenders Mortgage Insurance and often secure a better interest rate.
However, many first home buyers end up paying Lenders Mortgage Insurance, because it allows them to buy a house sooner.
Family Assistance/ Financial Gift
The family assistance we’re referring to here is a little more than asking your brother to help move the fridge down the block of stairs at your apartment block.
Here, we’re talking about a monetary gift (again, generally from your parents) that increases the cash contribution you have available for a purchase.
There can be legal implications you may want to look into and lenders have different requirements as to how the financial gift needs to be documented. However, a financial gift from the ‘bank of mum and dad’ is an extremely common way homebuyers are getting into the market.
First Home Guarantee Scheme (FHGS)
The First Home Guarantee Scheme is a government scheme designed to help first home buyers get into the market with a smaller deposit and reduced costs. Instead of the lender charging mortgage insurance when you’re looking to borrow more than 80% of the purchase price/ property value, the government ends up securing a portion of your loan instead.
You can find out more about this here.
There’s eligibility criteria you need to satisfy and securing a spot is not guaranteed, but the FHGS can be a good option for some first home borrowers.
Family Guarantee Loan
A family guarantee loan isn’t suitable for everyone, because it heavily depends on the financial situation of family members. A family member – typically your parents – first need to be in a financial position to assist you. They then need to be willing/happy to actually assist you.
A family guarantee loan reduces the amount of cash you need to save as a deposit, but you still need to be able to demonstrate you can cover the entire loan repayments yourself. Find out more about family guarantee loans here.
Buy property with a family member
Buying property with a family member means you only need to save half a deposit, pay half the mortgage and cover half of the bills. Whilst this strategy can introduce complications, in some circumstances it can be a way to help you get into your own home sooner.
If you want to explore all the ways you could buy your first home, let’s chat!
We can help you determine what’s possible now. Alternatively, we can help devise a plan so you’ll be ready to buy soon.
