Banks and lenders have very specific policies around lending to first home buyers and the pricing of their home loan products can vary substantially. To help secure the right home loan for your finance needs talk to a Better Mortgage broker today.
As a first home buyer, to find a good home loan you should investigate both your home loan options and government grants and entitlements you may be eligible for.
How Much Deposit Do I Need For A Home Loan?
One of the frequently asked questions in the loan process is how much deposit do I need for a home loan. As a first home buyer it’s helpful to know how much deposit you need to save for a home loan so you can get started with a savings plan. Minimum deposits vary between lenders and depend on the loan product you choose.
As a general rule, if you are an owner occupier you will require a minimum 5% of the purchase price as a deposit. If you are an investor, you will ideally require 5-10% of the purchase price.
Low deposit home loans can be great for first home buyers who haven’t been able to save a large deposit due to high rental payments.
If you are looking at a minimum deposit then you will also need to provide a proportion of the deposit as genuine savings. There are also some lenders now who will recognise 12 months continuous rental repayments as part of the genuine savings requirement.
Each bank will have their own credit policy on how they assess your deposit, so it comes down to knowing which bank or secure lender provides a home loan solution that can cater to your particular situation.
Your home loan deposit will usually need to be at least partly made up from genuine savings. You can also use a combination of other sources, including:
- First Home Owners Grant (FHOG) and state-based first home buyer incentives
- Monetary gifts, inheritances and tax refunds and sales of an asset such as shares
- First Home Saver Account
Don’t forget to leave some money aside to cover the other fees and charges associated with buying your property. Your Better Mortgage broker will go through a list of fees and charges you should consider.
Be aware that some of the conditions you have to meet for a low deposit home loan may be more stringent if you had a larger deposit.
The larger you can make your home loan deposit the better, as it reduces your home loan size and can also reduce or even eliminate the need to pay Lenders Mortgage Insurance (LMI).
First Home Buyers Grant
The First Home Owner Grant (FHOG) is a Federal Government initiative to encourage home owners when building or purchasing their first home. The amount eligible first home buyers receive (tax-free) is $7000. Some lenders may allow you to use the grant to boost your home loan deposit.
First Home Owners Grant Eligibility Criteria
An expert mortgage broker will make sure you qualify for the FHOG and that your grant is paid on settlement. Consider the below eligibility criteria:
- You must occupy the home within 12 months of settlement or within 12 months of building completion if it’s a newly built home.
- The property you buy must be a new or established house, home unit or flat.
- You or your partner must not have purchased a house, home unit or flat in Australia before.
- You must apply for the grant within 12 months of settlement or building completion.
- You must be an Australian citizen or permanent resident buying or building your first home in Australia.
State-Based Grants and Concessions
On top of that there are also additional state concessions for first home buyers.
Contact your Better Mortgage Professional for more information.