One-In-Three First Home Buyers Use Guarantee Schemes

First home buyers are ignoring headlines warning that it can take years to save a deposit. Instead, they are flocking to guarantee schemes that allow them to get into the market with just a 5% deposit, and without the cost of lenders’ mortgage insurance (LMI).

NHFIC, which runs the First Home Guarantee schemes set up by the federal government, says that in 2022/23, close to one in three first home buyers tapped into the guarantee schemes. That’s up from one in seven the year before.

In total, 41,700 home buyers got into the market with the help of guarantee schemes last financial year, following an uptick in the number of places available.

Younger Australians are buying a home

What’s especially exciting about NFHIC’s research is that it shows the schemes are allowing younger buyers to crack the property market.

In 2022/23, more than half of all places in the First Home Guarantee and Regional First Home Buyer Guarantee were taken by people under the age of 30. There has also been a fivefold increase in the number of buyers aged 18-24.

Key workers are buying with just a 5% deposit

The low deposit schemes are also helping a growing number of key workers such as teachers, nurses and social workers purchase a home. Around 7,721 guarantees were issued to key workers last financial year.

Debunking the low deposit myth

The First Home Guarantee has at times attracted criticism. This has largely been around the risks of buying with just a 5% deposit, which can mean taking on a larger loan with higher repayments. However, NFHIC data suggests that this has not been a problem.

Fewer than 0.1% of homeowners using the schemes have fallen behind on their loan repayments, which is less than the market average for all buyers with a low deposit loan. Better still, close to 10,000 scheme borrowers (over 12% of total guarantees issued to date) have already transitioned out of the scheme, with most of these buyers having accumulated enough equity to achieve a loan-to-value ratio (LVR) of less than 80%.

Could you be eligible for a 5% deposit scheme?

If you are a first home buyer struggling to save a 20% deposit, it is good to know there is a pathway to home ownership that can get you into a place of your own sooner. It can also help you to avoid paying LMI, which can cost you anywhere between $4,000 and $35,000, depending on the property price and your deposit amount.

Conditions apply for the 5% deposit schemes, but new rules mean you can buy with a sibling or a friend and still be eligible for this valuable financial helping hand.

With property values rising in many markets across Australia, time is of the essence. Call us today to see if you can buy a home with a 5% deposit and zero LMI.

What are the guarantee schemes mentioned in the article?

The guarantee schemes include the First Home Guarantee and the Regional First Home Buyer Guarantee, which assist first home buyers in entering the market with a lower deposit.

How do these schemes benefit first home buyers?

These schemes allow first home buyers to purchase a property with just a 5% deposit and avoid paying lenders’ mortgage insurance.

How many first home buyers used these schemes last year?

Last financial year, 41,700 home buyers got into the market with the help of these guarantee schemes.

Is it risky to buy a home with just a 5% deposit?

Despite concerns, data shows that fewer than 0.1% of homeowners using these schemes have fallen behind on repayments, indicating that it is not as risky as perceived.

Can these schemes be used for any type of property?

The schemes are generally available for a range of property types, but specific criteria should be checked for the type of property you are interested in.

How can a first home buyer apply for these guarantee schemes?

First home buyers should consult with a mortgage broker or financial advisor to understand the application process and check their eligibility for these schemes.

Phone: 1300 855 022

Email: clientservices@zippyfinancial.com.au

Zippy Financial is an award-winning mortgage brokerage specialising in home loans, property investment, commercial lending, and vehicle & asset finance. Whether you are looking to buy your first home, refinance or build your property investment portfolio, the team at Zippy Financial can help find and secure the right loan for you and your business.

About the Author:

Louisa Sanghera is an award-winning mortgage broker and Director at Zippy Financial. Louisa founded Zippy Financial with the goal of helping clients grow their wealth through smart property and business financing. Louisa utilises her expert financial knowledge, vision for exceptional customer service and passion for property to help her clients achieve their lifestyle and financial goals. Louisa is an experienced speaker, financial commentator, mortgage broker industry representative and small business advocate.

Connect with Louisa on Linkedin.

Louisa Sanghera is a Credit Representative (437236) of Mortgage Specialists Pty Ltd (Australian Credit Licence No. 387025).

Disclaimer: This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information. This article is not to be used in place of professional advice, whether business, health or financial.

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Booming Demand: The Rising Appeal of Units in the Real Estate Market

Apartments stand out as an affordable choice when it comes to cracking the property market, not to mention downsizing. But a looming shortage may push unit values higher.

According to CoreLogic, units can be an affordable choice for first home buyers, costing around 30% less than houses. Then, as we head into our senior years, an apartment offers secure, low maintenance living, often with a wealth of amenities right at the doorstep.

Apartment demand is outstripping supply

Apartments may be affordable today, but a lack of new apartment construction coupled with rising immigration levels, points to a looming apartment shortage, according to CoreLogic. And that could push values higher.

Over the next few years, new apartment construction is forecast to be 40% lower in the 2010s, leading to a shortfall of over 100,000 homes by 2027.

Close to 60% of new home shortfall is expected to be in the apartment market.

On the demand side, CoreLogic says a stronger-than-expected level of migration into Australia has seen overall housing demand “skyrocket”. Historically, new migrants head to the high-density areas of our big cities, putting extra pressure on the unit market.

As explained by CoreLogic, with interest rates potentially easing in 2024, greater demand and tight supply could fuel a “price boom” in the unit market.

Why are more of us choosing apartment living?

Modern apartments are packed with the latest design and sustainability features, meaning that they are no longer the poor relation to freestanding houses.

Across our major cities, apartments now account for 30% of all homes, up from 23% in 2010.

And the appeal does not just lie with affordability. Today’s apartments usually come with a wealth of benefits including:

Government schemes:

because apartments are generally cheaper than houses, they are more often under the price caps for a range of government schemes including the Home Guarantee Scheme, stamp duty concessions and first homeowner grants (usually for new builds). These schemes can be combined to potentially save tens of thousands of dollars and get you into the property market sooner.

Sought-after locations:

apartment living can be the difference between living close to work or facing a long daily commute from the outer suburbs.

Lifestyle advantages:

the days of apartments being cramped and lacklustre are over. A variety of on-site amenities, from barbecue areas to pools, gyms, and car-wash bays, make unit living convenient and relaxing.

Low maintenance living:

not interested in spending precious spare time mowing the lawns or cleaning the gutters? Unlike houses, units require minimal upkeep, letting residents enjoy more quality time.

Improved security:

if you are after a lock-and-leave lifestyle, modern apartments fit the bill. Advanced security features add up to a safe and secure living environment.

Is now the time to take the leap?

Right now, apartments still present an affordable option for first home buyers, downsizers, and investors.

The median apartment price across our state capitals is currently $637,593, but if CoreLogic is correct, that figure will soon increase as demands outstrips supply.

So, if you would like help exploring your options to purchase your first property, for example, with just a 5% deposit via the Home Guarantee Scheme, then get in touch to discover your borrowing power.

What is driving the increased demand for units in the real estate market?

The demand for units is being driven by factors such as affordability, urban lifestyle preferences, and the desire for lower maintenance living spaces.

Are units a good investment compared to traditional houses?

Units can be a good investment due to their typically lower entry price, potential for higher rental yields, and appeal to a diverse range of renters.

What should buyers consider when purchasing a unit for investment?

Buyers should consider location, amenities, body corporate fees, potential rental yield, and the overall condition and age of the unit.

How do units appeal to first-time homebuyers?

Units often appeal to first-time homebuyers due to their more affordable pricing and convenient locations near city centers and amenities.

Are there any downsides to investing in units?

Potential downsides include strata fees, restrictions on pet ownership and renovations, and possible oversupply in certain areas affecting growth potential.

How does the location of a unit impact its investment potential?

Location is crucial; units in high-demand areas, close to transport, shops, and amenities, typically have better growth and rental prospects.

Phone: 1300 855 022

Email: clientservices@zippyfinancial.com.au

About the Author:

Connect with Louisa on Linkedin.

Louisa Sanghera is a Credit Representative (437236) of Mortgage Specialists Pty Ltd (Australian Credit Licence No. 387025).

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Demystifying First-Time Home Buying: Debunking Common Myths

The journey to owning your first home is often shrouded in misconceptions and myths that can deter or mislead potential buyers. In today’s dynamic real estate market, it’s crucial to separate fact from fiction. This article aims to debunk common myths surrounding first-time home buying, providing clarity and confidence to those embarking on this significant life milestone.

Debunking Myths: The Dream Home Fallacy

A prevalent myth among first-time buyers is the idea of purchasing a ‘dream home’ right off the bat. This notion, often amplified by media portrayals and societal pressures, sets unrealistic expectations. The truth is, the first home is typically a stepping stone, a practical and financially feasible start to one’s property journey.

Common Myths Debunked: Financial Misconceptions

Many first-time buyers fall prey to financial myths. One such misconception is the need for a massive deposit. While a substantial deposit can reduce future repayments, there are various loan options available for those with smaller savings. Another myth is the overemphasis on buying in ‘perfect’ locations, often leading to overlooking affordable and potentially profitable areas.

The Financial Realities of First-Time Home Buying

Navigating the financial landscape as a first-time buyer can be daunting. Key challenges include understanding mortgage intricacies, managing credit scores, and budgeting for not just the purchase, but ongoing homeownership costs. It’s essential to have a realistic financial plan and possibly seek professional advice, such as a mortgage broker, to navigate these waters.

Alternative Approaches for First-Time Buyers

Contrary to popular belief, there are multiple pathways to homeownership. ‘Rentvesting,’ or renting in a desired location while owning property in a more affordable market, is an increasingly popular strategy. Exploring different property types, such as apartments or townhouses, can also provide a more accessible entry point into the market.

Adjusting Expectations for a Successful Purchase

First-time buyers should focus on long-term goals rather than short-term ideals. Adjusting expectations to align with financial realities and market conditions is key. This might mean prioritizing affordability and investment potential over perfection. Patience and flexibility are vital in making a wise and sustainable investment.

Prioritizing Affordability and Investment Potential

Realistic Budgeting: Adjusting expectations begins with a realistic assessment of your budget. While it’s natural to desire a dream home, it’s essential to prioritize affordability to avoid overextending financially. Consider your current financial situation, including income, expenses, and potential future changes.
Long-Term Investment Vision: Instead of focusing solely on immediate desires, adopt a long-term investment vision. Think about the property’s potential for appreciation, the development of the neighborhood, and its suitability for your future needs. Prioritizing investment potential over short-term perfection ensures a more strategic and financially sound decision.
Affordability Factors: Assess not only the purchase price but also associated costs like property taxes, maintenance, and potential renovations. Being mindful of these factors helps in setting realistic expectations and avoiding financial strain.

Patience and Flexibility in Decision-Making

Market Conditions: Real estate markets can be dynamic, and conditions may vary. Exercise patience and stay informed about market trends. Avoid making hasty decisions influenced solely by short-term market fluctuations. A well-timed and well-researched purchase is often more rewarding in the long run.
Property Search Flexibility: While it’s natural to have specific criteria in mind, be open to adjusting your property search criteria based on market realities. This flexibility increases the likelihood of finding a property that aligns with your long-term goals and budget.
Negotiation and Timing: Patience plays a significant role in negotiation. Waiting for the right time to make an offer or negotiating patiently with sellers can lead to better deals. Rushing through negotiations may result in compromises that can impact your long-term satisfaction with the purchase.

Success Stories: Real-Life Examples

There are countless success stories of first-time buyers who started with modest properties and gradually worked their way up. These stories often involve strategic compromises, such as buying in up-and-coming areas or opting for smaller properties, demonstrating that a dream home is often a journey, not a starting point.

The path to homeownership is unique for everyone and often fraught with myths that need debunking. By understanding the realities of the property market and adjusting expectations, first-time buyers can make informed, confident decisions. Remember, the first home is just the beginning of your property journey and property investment.

What are some common myths about first-time home buying?

There are several myths, such as needing a perfect credit score, requiring a large down payment, and the idea that renting is always cheaper than buying.

Do I need a perfect credit score to buy my first home?

No, while a good credit score helps, there are options available for those with less than perfect credit scores.

Is a 20% down payment mandatory for purchasing a home?

No, there are various loan programs available that allow for lower down payments, some as low as 3-5%.

Can first-time homebuyers get assistance with their purchase?

Yes, there are several first-time homebuyer programs and grants available to assist with down payments and closing costs.

Can I buy a home with a low income?

Yes, there are programs designed to help low-income individuals become homeowners.

Should I only consider the price of the home when buying?

No, other factors like location, property taxes, homeowners association fees, and future resale value should also be considered.

Phone: 1300 855 022

Email: clientservices@zippyfinancial.com.au

About the Author:

Connect with Louisa on Linkedin.

Louisa Sanghera is a Credit Representative (437236) of Mortgage Specialists Pty Ltd (Australian Credit Licence No. 387025).

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A Complete Guide to First Home Loan Deposit Scheme for First-Time Homebuyers

Navigating the journey of purchasing your first home can be as daunting as it is exciting. Amidst the sea of paperwork, financial decisions, and the quest for the perfect property investment lies the First Home Loan Deposit Scheme (FHLDS), a beacon of hope for many first-time homebuyers. This comprehensive guide aims to demystify the scheme, providing you with the knowledge and confidence to take that first step towards homeownership.

Understanding the First Home Loan Deposit Scheme

The FHLDS is an Australian Government initiative to support eligible first-time homebuyers. The scheme allows for a smaller deposit, as little as 5%, without the need for Lenders Mortgage Insurance (LMI). This can translate into significant savings, but what exactly is the First Home Loan Deposit Scheme, and how does it work?

What is the First Home Loan Deposit Scheme?

The scheme is designed to help first-time buyers enter the property market sooner by underwriting home loans for eligible participants. It’s a form of financial support that bridges the gap between the minimum deposit most buyers can save and the 20% typically required by lenders to avoid LMI.

Eligibility Criteria

To qualify for the FHLDS, you must:

Be a first-time homebuyer who has not previously owned or had an interest in a residential property in Australia.
Have a taxable income of up to $125,000 per annum for singles or $200,000 for couples.
Intend to be the owner-occupier of the purchased property.

The Role of Mortgage Brokers

Mortgage brokers can be invaluable in guiding you through the home loan process. They can help you understand the intricacies of the FHLDS and work with you to find a suitable lender. Their expertise can simplify the complex landscape of loans, rates, and terms, tailoring a solution that fits your unique financial situation.

Preparing for Your First Home Purchase

Before diving into the property market, it’s crucial to prepare. Here’s a checklist to get you started:

Budgeting: Assess your finances and determine how much you can realistically afford to borrow.
Saving: Focus on saving for a deposit, keeping in mind the 5% minimum for the FHLDS.
Credit Score: Check your credit score and take steps to improve it if necessary.

Interest Rates and Loan Options

With the FHLDS, you’re not restricted to one type of loan or lender. Interest rates and loan options will vary, so it’s essential to shop around. Compare the offerings from various lenders, including the loan terms, features, and flexibility, to find the best fit for your financial goals.

Navigating Paperwork and Compliance

The application process for the FHLDS involves its fair share of paperwork. From proof of income to identification, you’ll need to have your documents in order. Ensure you understand the requirements and deadlines to avoid any hiccups in your application.

Case Studies and Success Stories

Many first-time buyers have successfully navigated the FHLDS to purchase their first home. These stories can provide insights and inspiration, showcasing the scheme’s potential to make homeownership accessible.

The First Home Loan Deposit Scheme is a significant stepping stone for first-time buyers. It requires careful consideration and a thorough understanding of the financial commitment involved. By taking advantage of the scheme and leveraging the expertise of mortgage brokers, the dream of owning your first home can become a reality sooner than you might think.

What is the First Home Loan Deposit Scheme?

The First Home Loan Deposit Scheme is a government initiative to help first-time homebuyers purchase a home with a lower deposit requirement.

Who is eligible for the First Home Loan Deposit Scheme?

Eligibility criteria typically include being a first-time homebuyer, meeting income caps, and purchasing a property within a specific price range.

How much deposit do I need under the scheme?

The scheme allows first-time homebuyers to purchase a home with as little as a 5% deposit, with the government guaranteeing the rest.

Can I use the scheme in conjunction with other government grants?

Yes, the scheme can often be used in conjunction with other government programs like the First Home Owner Grant.

Is there a deadline for applying to the scheme?

There may be specific intake periods or caps on the number of applicants each year, so it’s important to check current deadlines.

What happens if I sell the property purchased under the scheme?

Selling the property may have implications on the benefits received under the scheme, and it’s advisable to consult with your lender or financial advisor.

Phone: 1300 855 022

Email: clientservices@zippyfinancial.com.au

About the Author:

Connect with Louisa on Linkedin.

Louisa Sanghera is a Credit Representative (437236) of Mortgage Specialists Pty Ltd (Australian Credit Licence No. 387025).

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Your First Investment Property: Essential Steps for Market Navigation

Entering the property market as an investor is a significant step towards financial growth and stability. For many, the acquisition of a first investment property is the initiation into a world of potential wealth and long-term returns. However, the journey to purchasing your first property can be as daunting as it is exciting. This guide aims to navigate you through the essential steps to make your first property investment a success.

Understanding the Property Market

Before diving into property investment, it’s crucial to understand the current market conditions. The landscape has evolved, and what was once a surefire strategy may now require adjustment. As a first home buyer investment property enthusiast, you must stay informed about market trends, interest rates, and economic indicators that influence property values.

Financial Readiness

Financial preparation is the bedrock of any successful investment. For first-time investors, this means:

Establishing a robust savings plan for your down payment.
Ensuring your credit score is in good standing.
Understanding the financial commitment involved in property investment.

The Investment Plan

A clear and concise investment plan is your roadmap to success. Define your investment goals, risk tolerance, and timeline. Whether you’re looking for immediate rental yields or long-term capital growth, your strategy should reflect your financial aspirations.

Choosing the Right Property

The adage “location, location, location” still holds true. However, it’s not just about the where; it’s also about the what. Are you looking for a residential unit to rent out or a commercial space with potential for appreciation? Each property type comes with its own set of considerations and market behaviors.

Securing Finance

Understanding mortgages and financing options is paramount. As a first home investment property seeker, getting pre-approved for a mortgage can give you a clear idea of your budget and strengthen your position when negotiating purchases.

Mortgage and Loans

Understanding mortgages and loans is vital. As a first-time investor, you’ll need to get familiar with different loan types and what they mean for your investment. Look into getting pre-approved for a mortgage to understand your budget better and make you a more attractive buyer. Mortgage brokers can be invaluable in this process, helping you navigate the complex landscape of home loans and financing options.

Due Diligence

Never skip the due diligence. This includes:

Conducting thorough property inspections.
Getting the property appraised.
Ensuring all legal checks are in place.

This step can save you from future headaches and financial losses.

Building Your Team

Surround yourself with experts. A reliable real estate agent, a knowledgeable lawyer, and a savvy accountant can make all the difference. Consider enlisting a property manager to handle day-to-day operations if you’re not keen on being a landlord.

Managing Your Investment

Once you’ve secured your investment, effective property management becomes key. This includes finding the right tenants, setting competitive rent prices, and maintaining the property to ensure it continues to grow in value.

The Long Game

Property investment is not a get-rich-quick scheme. It’s about playing the long game. This means being prepared for market fluctuations, understanding the tax implications, and knowing when to hold or sell your asset.

Your first investment property is a learning experience and an opportunity to grow your financial portfolio. With careful planning, due diligence, and the right support, you can make informed decisions that pave the way to a prosperous investment future.

What are the first steps to consider when buying an investment property?

Research the market to understand property values and rental demand. Assess your finances to determine your budget and borrowing capacity. Consider the location and type of property that aligns with your investment goals.

How much deposit do I need for an investment property?

Typically, a 20% deposit is standard for investment properties, but this can vary depending on the lender and your financial situation.

What should I look for in a good investment property?

Look for properties in areas with strong growth potential, high rental demand, and low vacancy rates.

Is it better to invest in residential or commercial properties?

This depends on your investment strategy, budget, and risk tolerance. Residential properties are generally considered less complex, while commercial properties can offer higher yields but may come with more risks.

How can I finance my first investment property?

Explore options like traditional mortgages, investment loans, or leveraging equity from another property. Compare rates and terms from multiple lenders.

How can I mitigate risks when investing in property?

Diversify your investments, maintain a cash reserve for unexpected expenses, and stay informed about market trends and property management best practices.

Phone: 1300 855 022

Email: clientservices@zippyfinancial.com.au

About the Author:

Connect with Louisa on Linkedin.

Louisa Sanghera is a Credit Representative (437236) of Mortgage Specialists Pty Ltd (Australian Credit Licence No. 387025).

One-In-Three First Home Buyers Use Guarantee Schemes

Younger Australians are buying a home

Key workers are buying with just a 5% deposit

Debunking the low deposit myth

Could you be eligible for a 5% deposit scheme?

Frequently Asked Questions

What are the guarantee schemes mentioned in the article?

How do these schemes benefit first home buyers?

How many first home buyers used these schemes last year?

Is it risky to buy a home with just a 5% deposit?

Can these schemes be used for any type of property?

How can a first home buyer apply for these guarantee schemes?

RELATED ARTICLES

SERVICE LOCATIONS

Booming Demand: The Rising Appeal of Units in the Real Estate Market

Apartment demand is outstripping supply

Why are more of us choosing apartment living?

Government schemes:

Sought-after locations:

Lifestyle advantages:

Low maintenance living:

Improved security:

Is now the time to take the leap?

Frequently Asked Questions

What is driving the increased demand for units in the real estate market?

Are units a good investment compared to traditional houses?

What should buyers consider when purchasing a unit for investment?

How do units appeal to first-time homebuyers?

Are there any downsides to investing in units?

How does the location of a unit impact its investment potential?

RELATED ARTICLES

SERVICE LOCATIONS

Demystifying First-Time Home Buying: Debunking Common Myths

Debunking Myths: The Dream Home Fallacy

Common Myths Debunked: Financial Misconceptions

The Financial Realities of First-Time Home Buying

Alternative Approaches for First-Time Buyers

Adjusting Expectations for a Successful Purchase

Prioritizing Affordability and Investment Potential

Patience and Flexibility in Decision-Making

Success Stories: Real-Life Examples

Frequently Asked Questions

What are some common myths about first-time home buying?

Do I need a perfect credit score to buy my first home?

Is a 20% down payment mandatory for purchasing a home?

Can first-time homebuyers get assistance with their purchase?

Can I buy a home with a low income?

Should I only consider the price of the home when buying?

RELATED ARTICLES

Service Locations

A Complete Guide to First Home Loan Deposit Scheme for First-Time Homebuyers

Understanding the First Home Loan Deposit Scheme

What is the First Home Loan Deposit Scheme?

Eligibility Criteria

The Role of Mortgage Brokers

Preparing for Your First Home Purchase

Interest Rates and Loan Options

Navigating Paperwork and Compliance

Case Studies and Success Stories

Frequently Asked Questions

What is the First Home Loan Deposit Scheme?

Who is eligible for the First Home Loan Deposit Scheme?

How much deposit do I need under the scheme?

Can I use the scheme in conjunction with other government grants?

Is there a deadline for applying to the scheme?

What happens if I sell the property purchased under the scheme?

RELATED ARTICLES

SERVICE LOCATIONS

Your First Investment Property: Essential Steps for Market Navigation

Understanding the Property Market

Financial Readiness

The Investment Plan

Choosing the Right Property

Securing Finance

Mortgage and Loans

Due Diligence

Building Your Team

Managing Your Investment

The Long Game

Frequently Asked Questions