Navigating the property market as a first-time buyer can be daunting, with media often portraying it as nearly impossible without a six-figure deposit.
However, we recently caught up with Lauren Worldon, an experienced mortgage broker, who debunks this myth and explained how first-time buyers can buy a property with a deposit of $50,000 or even less.
Here’s a breakdown of the key insights and tips shared in our conversation.
Is Buying with $50,000 or Less Possible?
Yes, and even with as little as $46,000, if buyers leverage available government benefits. Here’s a simple overview:
1. Five Percent Deposit : Typically, for a property valued at $800,000, buyers need to save $40,000 as a 5% deposit.
2. Stamp Duty and Lenders’ Mortgage Insurance (LMI) : Without government support, buyers would face an additional $60,000 in these costs, but first-time buyers can access the following two key benefits.
- Stamp Duty Waiver: Many state governments waive stamp duty for eligible first-time buyers, saving $31,000 on a property purchase of $800,000.
- LMI Removal: Through federal government initiatives, eligible buyers can avoid LMI, saving another $30,000.
3. Additional Fees : Miscellaneous costs like legal fees, building inspections, and moving add up to about $6,000.
With these programs and including costs, first-time buyers need only $46,000 for an $800,000 property.
Is It Better to Buy New or Existing Homes?
Both new and existing homes are eligible for government benefits, but each has its pros and cons. New homes may offer additional financial incentives but can sometimes come at a premium. In major cities, buying existing homes often provides better value, as buyers avoid the new-home markup.
Choosing the Right Loan
While a low interest rate is often top-of-mind, it’s important to prioritize the right loan product for a buyer’s specific situation. Factors such as loan structure, income requirements, and financial goals may determine the best lender match, even if their rate isn’t the lowest on the market.
Emerging Trends for First-Time Buyers
Government initiatives like the First Home Guarantee and state-based stamp duty waivers are helping make home ownership more achievable. However, as property prices rise, more buyers are turning to family guarantees to bridge the gap, tapping into parental home equity to secure their first property.
Essential Tips for First-Time Buyers
- Start with a Budget: Review your take-home pay to determine what portion can go towards not just mortgage payments but also insurance, maintenance, and utility costs.
- Account for Additional Costs: Beyond the deposit, budget for expenses like legal fees, inspections, and moving costs.
- Get Pre-Approved: Secure a pre-approval before house hunting to establish a realistic budget.
- Consider a Buyer’s Agent: A buyer’s agent can help streamline the search and negotiation process, potentially giving you access to off-market properties and saving time.
The Bottom Line
Buying a first home with a modest deposit is possible with the right guidance and strategic use of government incentives. First-time buyers can make informed decisions and take advantage of valuable resources, like mortgage brokers and buyer’s agents, to make their homeownership journey as smooth as possible.
Lauren’s role as a mortgage broker through her company Apex Mortgage Advisory involves simplifying the home loan process, which can be overwhelming and complex. With access to around 60 lenders, she acts as a matchmaker to find the right loan tailored to each buyer’s needs, whether it’s income requirements, loan structure, or unique policy exceptions. And remember one of the biggest perks of using a broker is their services are typically free to buyers, as banks pay them directly.
Contact Lauren – lauren@apexmortgageadvisory.com.au or https://www.apexmortgageadvisory.com.au/
Watch the full interview here.
About the author
Debra Beck-Mewing is the Editor of the Property Portfolio Magazine and CEO of The Property Frontline. She has more than 20 years’ experience in buying property Australia-wide and has extensive experience in helping buyers use a range of strategies including renovating, granny flats, sub-division and development. Debra is a skilled property strategist, and a master in identifying tailored opportunities, homes and sourcing properties that have multiple uses. She is a Qualified Property Investment Advisor, licensed real estate agent and also holds a Bachelor of Commerce and Master of Business. As a passionate advocate for increasing transparency in the property and wealth industries, Debra is a popular speaker on these topics. She is also an author, podcast host, and participates on numerous committees including the Property Owners’ Association.
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Disclaimer – This information is of a general nature only and does not constitute professional advice. We strongly recommend you seek your own professional advice in relation to your particular circumstances.
