Most Australians aspire to own their own home. It’s a founding concept of the Australian dream and helps to ensure you have financial security in life. However, the rising house prices are making it increasingly difficult to take the first step, on the property ladder. It’s estimated property prices have increased seven times faster than wages.
Although it is making it harder to get on the property ladder, it’s not impossible, people simply need to plan more carefully and save harder. It helps to know what you need to buy your first home.
Of course, participating in the Surf Life Saving home lottery can help you to win a fantastic house and avoid the need to save a deposit. It may be a long shot but someone needs to win!
In most cases, you’re going to need a deposit of 5%. That means, if you’re looking at a $500,000 house you’ll need a $25,000 deposit. Although this is a significant sum it is possible to save it if you are committed to a budget.
It should be noted that this is the bare minimum as many lenders insist on a 20% deposit. For a $500,000 house that’s a whopping $125,000!
Before you start saving you should check what government schemes are in your area. It is possible you’ll get assistance with the deposit. The government offers a loan deposit scheme which is aimed exclusively at first-time buyers.
Considering the average price of a home for a first-time buyer is $300,000 you may need a deposit of just $15,000. However, that means a mortgage of $285,000 and other costs.
It is important to note that a low deposit carries an additional risk to the lender. To protect themselves, they will insist you take out low deposit insurance. In most cases, this is a one-off payment, made when you take out the home loan. The exact amount of this will depend on the value of your property and the deposit you have available. However, if you’re eligible for the government LMI scheme they will guarantee the rest of your deposit, making the deposit insurance unnecessary.
That’s not the only cost you need to be aware of. Stamp duty is another to be aware of. This is applied at different rates depending on where you live. You’ll need to check the property value threshold and what charge your local state makes.
Alongside this, there will be legal fees that need to be taken into consideration. You can’t purchase a property without legal representation. They ensure everything is above board, the seller has the right to sell and they’ll check on any major developments in the area. In short, they will help you to make the right property decisions, but it comes at a cost.
By knowing all the costs you’ll have to pay out before you can purchase your first home, you’ll be better prepared and this will make it easier to get the house you want.