CALL 1300 GO BEYOND
BUDGETING AND THE BORING STUFF
WHAT YOU WANT VS. WHAT YOU CAN AFFORD
Let’s face it – this part is far from exciting. I can’t remember how many times I’ve spoken to first home buyers and their excitement turns to depression when you bring up finance. Unfortunately, it’s essential and you need to have your head around it.
So, how much do you want to spend versus how much can you afford? Your bank or broker can give you a figure based on how much you earn and how much you spend. Be realistic when you factor in living expenses here because what’s the point in buying a house if everything you do from that point on hinges on you being able to make your next repayment? In my opinion you want a buffer that is larger than what the bank approves as the minimum.
DEPOSITS - HOW MUCH DO YOU NEED
So you know how much you can borrow and unless you have been living under a rock it is pretty widely known that you will need a deposit to get started.
Most banks will need to see a savings history over at least a 3-month period in order to approve your finance. Establish a savings plan that will help you achieve at least 5% of the property value plus fees and charges, and stick to it.
Based on median house prices in Perth at the moment this works out to be about $40,000 - $45,000, but a larger deposit will help you avoid fees.
DEPOSIT ALTERNATIVES
RENTAL HISTORY
Some banks will accept a rental history as evidence of savings if you can prove rental payments through a registered agency. Just to be clear, this doesn’t absolve you from contributing a 5% deposit but it opens up the option of receiving gifted funds or selling an asset. Be careful if you go down this route.
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GUARANTORS
Using a guarantor is essentially using your parents’ equity to provide a deposit for your home. This is of course assuming they have equity in their house and love you enough to risk their guaranteed amount if you can't repay the debt. This is also a great way to avoid Lenders Mortgage Insurance (more on that later).
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THOSE TV ADVERTS
There are also other options available that require an even smaller deposit. You know the ones – those house and land packages advertised on TV. They are a great option but do have restrictions on eligibility and are essentially designed to help lower income earners purchase property. A lot of the applications are completed through Keystart (a government back loan scheme) as well as privately executed deals with developers, so shop around.
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FIRST HOME SUPER SAVER (FHSS) SCHEME
The FHSS scheme allows you to save money for your first home inside your superannuation fund. This will help first home buyers save faster with the concessional tax (pre tax) treatment of super. When all is said and done you may be able to access up to $30,000 from your superannuation fund to contribute to the purchase. Strict eligibility requirements do apply. More information available here.
FIRST HOME OWNERS GRANT - $10,000 FOR THOSE BUILDING (WA ONLY)
The first home owner’s grant can contribute to your deposit but is currently only available in Western Australia when you are building. This includes:
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Off the plan purchase (buying a property that hasn’t been built yet)
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House and land packages
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Newly established homes
If you decide to buy land and then build separately you will be entitled to receive the grant but only when funds are first drawn down which is typically when the slab is laid and obviously too late to be included in the deposit.
If you or your spouse have never accessed the grant and never owned a house then chances are you probably qualify but the complete eligibility rules are available here.
HOME BUYERS ASSISTANCE ACCOUNT – $2000 FOR THOSE BUYING (WA ONLY)
This is currently only available for purchases of established and partially built homes worth $400,000 or less through licensed real estate agents.
With this scheme, you are entitled to up to $2000 in fee assistance as a first home buyer in Western Australia to assist with associated purchase costs. For additional detail on HBAA eligibility click here.