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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Opportunities for First Home Buyers Amid Rising Property Prices

In an era where property prices are continuously on the rise, navigating the real estate market has become increasingly challenging, especially for first-time homebuyers. This article explores the current landscape of property prices in Australia and offers strategic insights for those looking to make their first foray into property investment and homeownership.

Understanding the Market Dynamics

The surge in property prices is influenced by a variety of factors, including economic growth, interest rates, and market demand. In Australia, the property market has seen significant growth, making it daunting for first-time buyers to find affordable options. Understanding these dynamics is crucial in making informed decisions.

Government Support and Incentives

To assist first-time buyers, the Australian government has introduced several schemes, such as the First Home Guarantee. These initiatives aim to make homeownership more accessible by offering financial support and incentives. It’s important for potential buyers to stay updated on these opportunities and understand how they can benefit from them.

Alternative Strategies for Homebuyers

With property prices soaring, considering alternative strategies becomes essential. One approach is exploring more affordable regions or suburbs, where property prices may be more within reach. This shift can open up new possibilities for homebuyers who are willing to look beyond their initial preferences.

Financial Planning and Mortgage Considerations

Effective financial planning is key in the context of rising property prices. Prospective buyers should focus on securing favorable mortgage terms and understanding the long-term implications of their financial commitments. Seeking pre-approval for a mortgage can also provide a clearer picture of what is financially feasible.

Securing Favorable Mortgage Terms

Creditworthiness and Interest Rates: Prioritize improving your creditworthiness to secure more favorable interest rates. A higher credit score often translates to lower interest rates on your home loan. Regularly monitor your credit report, address any discrepancies, and take steps to enhance your credit profile before applying for a mortgage.
Down Payment Strategies: Strategize your down payment approach. While a 20% down payment is a common benchmark, explore options that align with your financial circumstances. Down payment assistance programs, government-backed loans, and other creative approaches can provide flexibility in meeting down payment requirements.
Professional Mortgage Advice: Engage with mortgage brokers and financial advisors for professional guidance. Mortgage brokers can help you navigate the myriad of loan options, negotiate with lenders, and secure competitive terms. Financial advisors contribute by aligning your mortgage decisions with broader financial goals.

The Strategic Role of Pre-Approval

Clarity on Financial Feasibility: Seeking pre-approval for a mortgage is a strategic step in gaining clarity on what is financially feasible. It involves a thorough assessment of your financial background by a lender, providing you with a clear picture of the loan amount you qualify for. This knowledge empowers you to narrow down your property search within your budget.
Enhanced Negotiation Power: Pre-approval enhances your negotiation power. Sellers often prioritize offers from buyers with pre-approved financing, as it indicates a serious intent and the ability to secure the necessary funds. This can be a decisive factor in competitive real estate markets.
Streamlining the Home-Buying Process: The pre-approval process streamlines the overall home-buying process. With a pre-approved mortgage, you can move quickly when you find the right property, potentially gaining a competitive edge over other buyers who may still be in the early stages of securing financing.

Proactive Adaptation to Market Dynamics

Monitoring Interest Rate Trends: Stay vigilant about interest rate trends. With rising property prices, even slight changes in interest rates can impact affordability. Regularly monitor market conditions and consider locking in your interest rate when it aligns with your financial objectives.
Flexibility in Home Search: Maintain flexibility in your home search. Be open to exploring different neighborhoods, property types, and sizes to find options that align with your budget. Flexibility allows you to adapt to market dynamics and make well-informed decisions.
Regular Financial Check-ins: Conduct regular financial check-ins, especially in the context of rising property prices. Assess your financial goals, review your budget, and adjust your financial plan as needed. Regular evaluations empower you to proactively adapt to changing market conditions.

Long-Term Investment Perspective

Despite the current high property prices, real estate remains a valuable long-term investment. The market’s historical trend of growth suggests that investing in property can yield significant returns over time. Therefore, buyers should consider the long-term benefits of entering the market now, despite the high entry costs.

The rise in property prices in Australia presents both challenges and opportunities for first-time homebuyers. By staying informed, exploring government incentives, considering alternative locations, and planning finances carefully, prospective buyers can navigate these challenges successfully. The key is to approach the market with a strategic mindset and a long-term investment perspective.

What are the current trends in property prices in Australia?

Property prices in Australia have been on a steady rise, influenced by factors like economic growth and market demand.

How can first-time homebuyers navigate the rising property prices?

First-time homebuyers can navigate rising prices by staying informed, exploring government incentives, considering alternative locations, and planning their finances carefully.

What government schemes are available to assist first-time homebuyers in Australia?

The Australian government offers several schemes, such as the First Home Guarantee, to make homeownership more accessible for first-time buyers.

Is it a good idea to look for properties in more affordable regions?

Yes, exploring more affordable regions or suburbs can be a strategic move for homebuyers facing high property prices in their preferred areas.

How can first-time buyers stay updated on opportunities and market changes?

Staying in touch with real estate experts, financial advisors, and regularly following market news and updates can help buyers stay informed.

What alternative strategies can be considered apart from buying in different locations?

Other strategies include looking into different types of properties, considering joint ownership, or exploring rent-to-own options.

Can first-time homebuyers benefit from consulting with financial advisors or real estate experts?

Yes, consulting with financial advisors or real estate experts can provide personalized advice and guidance, helping buyers make the most of the current market conditions.

Get in touch

Looking for financial solutions amidst rising property prices? Contact Zippy Financial today to explore support schemes and overcome the challenges faced by first home buyers.

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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Buying a Property with Friends and Family

In an era of escalating property prices, the idea of purchasing property with friends and family is gaining popularity. This innovative approach to homeownership provides a solution to the affordability crisis, enabling individuals to combine resources for a shared investment in property.

The Rise of Collective Property Purchases

The trend of co-ownership is gaining momentum, driven by the need for more affordable housing solutions. With the cost of buying a property alone out of reach for many, joining forces with friends or family members presents a viable alternative. This approach not only eases the financial burden but also opens doors to better properties that might otherwise be unattainable.

Advantages of Co-Ownership

Buying a property collectively comes with several benefits. Shared financial responsibility means less strain on individual budgets, allowing for a more significant investment. It also fosters a sense of community and shared purpose, as co-owners embark on the homeownership journey together. Additionally, exploring options for asset finance can enhance the financial flexibility of the collective investment.

Understanding the Challenges

Despite its advantages, co-ownership is not without its challenges. Legal complexities, potential conflicts, and financial risks are inherent in any joint investment. It’s crucial to acknowledge these challenges upfront and prepare for them adequately.

Legal and Financial Considerations

When it comes to buying a property with others, understanding the legal implications is vital. Options like joint tenancy or tenants in common offer different rights and responsibilities. A clear, written agreement outlining each party’s contribution, responsibilities, and exit strategies is essential to avoid future disputes.

Preparing for Co-Ownership

Before committing to buy a property with friends or family, it’s important to consider several factors. Assessing the compatibility of financial goals, long-term plans, and conflict resolution strategies is crucial. Each party should be clear about their expectations and commitments.

Compatibility Assessment in Financial Goals

Open Financial Discussions: Initiate open and transparent discussions about financial goals. Understanding each co-owner’s financial aspirations, whether it be long-term wealth-building, property appreciation, or short-term investment returns, forms the foundation for a harmonious co-ownership arrangement.
Budget Alignment: Assess the alignment of individual budgets and financial capabilities. Co-owners should have a shared understanding of how costs will be distributed, covering aspects such as mortgage payments, property maintenance, and unexpected expenses. This alignment prevents financial strains and promotes a collaborative approach to financial responsibilities.
Risk Tolerance Evaluation: Evaluate the risk tolerance of each co-owner. Divergent risk preferences may lead to disagreements on property-related decisions. Establishing a collective risk tolerance framework ensures that major decisions, such as property improvements or leveraging equity, are made with consensus.

Long-Term Planning and Vision Alignment

Shared Long-Term Goals: Discuss and align on long-term plans for the property. Co-owners should share a vision for the future use of the property, whether it’s a long-term residence, a vacation home, or an investment property. This alignment minimizes potential conflicts arising from disparate expectations.
Exit Strategies: Establish clear exit strategies in case one co-owner decides to sell their share or circumstances change. This includes predefined processes for selling the property, right of first refusal agreements, and mechanisms for determining the property’s value in the event of a buyout.
Contingency Planning: Anticipate potential life changes, such as job relocations, family expansions, or shifts in financial circumstances. Develop contingency plans to address these changes and ensure that the co-ownership arrangement remains adaptable to the evolving needs and goals of each party.

Conflict Resolution Strategies

Formal Agreements: Consider creating formal co-ownership agreements that outline the rights, responsibilities, and decision-making processes of each party. These agreements can address potential areas of conflict, such as property usage, maintenance responsibilities, and dispute resolution mechanisms.
Communication Protocols: Establish effective communication protocols for addressing disagreements. Regular check-ins and scheduled meetings provide a platform for open discussions, allowing co-owners to express concerns, share perspectives, and collectively find solutions to potential conflicts.
Professional Mediation Options: Include provisions for professional mediation in the co-ownership agreement. In the event of unresolved conflicts, having a neutral third party mediate can facilitate constructive discussions and help co-owners reach mutually agreeable resolutions.

Expert Guidance for a Smooth Process

Navigating the complexities of co-ownership requires expert advice. Consulting with financial advisors, mortgage brokers, and real estate professionals can provide valuable insights and help tailor a mortgage solution that suits everyone’s needs.

Buying a property with friends and family can be a rewarding experience, offering financial and emotional support. However, it’s important to approach this arrangement with careful planning and clear communication. By understanding the benefits and challenges, and seeking expert advice, co-owners can embark on a successful property ownership journey together.

What are the benefits of buying a property with friends and family?

Shared financial responsibility, access to better properties, and fostering a sense of community.

What are the main challenges of co-owning a property?

Legal complexities, potential conflicts, and financial risks associated with joint investments.

How can we legally structure our co-ownership?

Options include joint tenancy or tenants in common, each with different rights and responsibilities.

Is it necessary to have a written agreement when buying property collectively?

Yes, a clear agreement outlining contributions, responsibilities, and exit strategies is crucial.

Can we sell or leave the property if one co-owner wants out?

The co-ownership agreement should specify the process for selling or transferring ownership shares.

What happens if there is a disagreement among co-owners?

The co-ownership agreement should include a conflict resolution process, and professional mediation may be necessary.

Should we seek professional advice before buying a property with friends or family?

Yes, consulting with financial advisors and real estate professionals is highly recommended for a smooth process.

Get in Touch to Explore Your Co-Buying or Guarantor Options

Co-ownership with friends or family, or having a parent go guarantor for you, isn’t suitable or possible for everyone, but there are people out there for whom it might be a good fit. If you think that could be you, and you want to learn more, then get in touch!

We would be happy to run you through a number of possible structured options and opportunities, as well as the challenges, hurdles and pitfalls you will want to consider. And if co-buying does not look like a good fit for you, we can run through a range of other buying options including federal government schemes that might be more suitable for you.

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

Opportunities for First Home Buyers Amid Rising Property Prices

Understanding the Market Dynamics

Government Support and Incentives

Alternative Strategies for Homebuyers

Financial Planning and Mortgage Considerations

Securing Favorable Mortgage Terms

The Strategic Role of Pre-Approval

Proactive Adaptation to Market Dynamics

Long-Term Investment Perspective

Frequently Asked Questions

What are the current trends in property prices in Australia?

How can first-time homebuyers navigate the rising property prices?

What government schemes are available to assist first-time homebuyers in Australia?

Is it a good idea to look for properties in more affordable regions?

How can first-time buyers stay updated on opportunities and market changes?

What alternative strategies can be considered apart from buying in different locations?

Can first-time homebuyers benefit from consulting with financial advisors or real estate experts?

Get in touch

RELATED ARTICLES

SERVICE LOCATIONS

Buying a Property with Friends and Family

The Rise of Collective Property Purchases

Advantages of Co-Ownership

Understanding the Challenges

Legal and Financial Considerations

Preparing for Co-Ownership

Compatibility Assessment in Financial Goals

Long-Term Planning and Vision Alignment

Conflict Resolution Strategies

Expert Guidance for a Smooth Process

Frequently Asked Questions

What are the benefits of buying a property with friends and family?

What are the main challenges of co-owning a property?

How can we legally structure our co-ownership?

Is it necessary to have a written agreement when buying property collectively?

Can we sell or leave the property if one co-owner wants out?

What happens if there is a disagreement among co-owners?

Should we seek professional advice before buying a property with friends or family?

Get in Touch to Explore Your Co-Buying or Guarantor Options

RELATED ARTICLES

SERVICE LOCATIONS