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Buying your First Home
Buying your first home should be an exciting and satisfying experience and with a little knowledge and preparation there is no reason why it shouldn’t be. There are a number of things to be aware of ranging from the various government benefits for first home buyers to understanding the requirements the various lenders place on you before they will give you a loan.
Government grants and stamp duty exemptions can save a substantial amount off the cost of your new property so these benefits are worthwhile if you’re eligible.
A number of benefits may be available for first home buyers including a first home owner’s grant, an exemption of stamp duty costs, and a first home buyer guarantee which can help avoid the need to pay the lender a mortgage insurance cost.
The First Home Owners Grant
Each state has different qualification rules and pay different grant amounts. The grant varies from state to state. The property you purchase may need to be brand new to qualify for the first home owners grant. See the first home grant and stamp duties page for more information.
To be eligible for the First Home Owners Grant you must be an Australian citizen or permanent resident and you (and your spouse / partner) must have not previously owned a home in Australia. If there are 2 applicants, at least one applicant needs to be an Australian citizen or permanent resident to qualify.
Generally you are required to live in the property for a period of at least 6 consecutive months commencing within the first 12 months after purchase. Therefore, there may be some flexibility in complying if you decide not to live in the property straight away or alternatively live in it for six or more months and then rent it out following that.
Stamp Duty Exemptions
State governments usually charge a stamp duty cost as a percentage of the cost price on a property purchase. The duty amount is around 4% of the cost price in most states. If you meet the state rules as a first home buyer, most states will offer you a reduction in the stamp duty amount payable. The discount is dependent on the cost price of the property and other factors. See first home grant and stamp duties page for more information
Eligible applicants must be an Australian citizen or permanent resident and you (and your spouse / partner) must have not previously owned a home in Australia. Once the property cost exceeds a certain price threshold (less for vacant land), the exemptions offered by the state governments start to drop. These rules and exemptions change frequently so please call Home Loan Advice Centre on 02-9210-1000 for more information.
First Home Buyer Guarantee
The First Home Buyer guarantee scheme is a government benefit that allows eligible first home buyers to avoid paying a lender’s mortgage insurance premium to a lender when they ask for a loan greater than 80% of the value of the property. This mainly helps first home buyers who have a limited deposit and can save thousands of dollars in upfront costs. There are a number of conditions for eligibility to this scheme and a limited allocation of places issued by the government each year. An application for a place in this scheme can be made at the same time as your loan application.
Deposit Required
The maximum loan possible to assist with your purchase is generally limited to 95% of the value of the property plus a mortgage insurance premium (which usually is capitalised onto the loan) taking the total borrowing up a level about 97%-98% of the cost price or more. The amount of deposit you need to provide is dependent on the loan %, whether or not you get any first home buyers grant, and whether you have any stamp duty cost. It differs for different buyer’s circumstances, for different cost prices, whether you purchase a brand new or established property, and which state you purchase in. Our free home loan assessment works all this out for you.
Various lenders may also have rules requiring you show a capacity to save up to 5% of the cost price via a 3 month savings record. This is called genuine savings and the requirement is on a case-by-case basis and dependent on your final required loan to value ratio.
Loan capacity
Your capacity to borrow money from the various lenders is determined mainly by your income, your personal situation (married, single, children vs no children, debt levels, and each individual lender’s serviceability calculations.
Repayments
Your repayments will depend on your final loan amount, your interest rate, and your choice of repayment type (principle and interest or interest-only)