If like thousands of Australians you’re eager to dip your toe in the property pool but not sure you’ll ever be able to save enough – take a deep breath and remember where there’s a will, there’s a way. With a little luck, good timing and out-of-the-box thinking – your dream home isn’t as far off as you think.
If buying in your beloved major city is out of reach, rentvesting might be the answer you’re looking for. Rentvesting is a culmination of the words rent and investing and means continuing to rent your place of residence and purchasing an investment property. Increasing inner-city prices gave rise to the movement, with first home buyers looking to cheaper rural properties to get their foot into the market.
2. Don’t be a snob
If you want to nab a real estate bargain for your first home, it might be wise to look outside of your preferred areas toward less desirable suburbs. As prices rise in the outer suburbs of major cities, less desirable areas close to the city are rising with them. You might have to wait a while for the area to catch up to your inner-city standards, but you could potentially be rewarded with a bigger profit margin.
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3. Take advantage of being a first home buyer
There are a few ways being a first home buyer can work to your advantage – the First Home Loan Deposit Scheme and the First Home Owner’s Grant (FHOG). The first is an initiative where the government goes guarantor for up to 15% of the property’s price, meaning you only need to have a 5% deposit. The FHOG comes in the form of a lump sum payment – $10,000 for existing homes and $20,000 to build a new one. Eligibility for both and the amount received is based on individual circumstances.
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4. Be wary of estate agents
Estate agents are there to sell you a house, which can sometimes lead to people buying beyond their means. To avoid falling for any sales tactics, determine your absolute upper limit and research the property and area before inspections or auctions.
Having your loan pre-approved is a surefire way to avoid falling for aforementioned sales tactics, or simply spending too much. A pre-approved loan will force you to look at houses in your budget and stop you from offering that little bit extra.
6. Get your foot in your door
Sometimes it’s best to just get in your foot in the door, even if it’s not in your dream house or location. Remember that first homes aren’t necessarily the homes you will live in forever. Think of it as a stepping-stone along the journey to your dream home.
7. Follow the 30% rule
The 30% rule, aka do not spend more than 30% of your income on mortgage repayments, is an excellent guide to help you determine your budget. Following this rule might mean your first home isn’t your dream home, but it will allow you to live comfortably and pay off your mortgage.
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8. Up your credit score
Increasing your credit score can help maximise borrowing power. There are numerous ways to improve your credit score, but you need to know what it is before making any changes. You can quickly and easily check your credit score on several platforms, like Canstar or Finder.
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Guarantor loans are becoming more common as property prices rise. Simply put, a guarantor uses the equity in their property to guarantee 20% of the mortgage. They are most commonly undertaken by a parent, and with an investment property, as some banks don’t allow main residents to be used. Taking this route means you may no need to pay a deposit or Lenders Mortgage Insurance. You will still need to prove you can pay the regular repayments and put down a 10% down payment at purchase.
10. Consider co-ownership
If your parents aren’t in the position to go, guarantor, perhaps they might consider co-ownership. The property’s price can be divided however you like – meaning a co-owner can take on 50% of the cost, or as little as 5 or 10% – whatever is needed to get you into your first home. If your parents also aren’t a viable option for co-ownership, you can be like Ben and Emma and ask a friend.
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By Nell Matzen
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- How you can buy a house with a low income
Are you saving for your first home but aren’t sure what your next step should be? eChoice can help you get that all-important pre-approval sorted so you can submit your offer with confidence. We have access to hundreds of products, so we’ll find you a competitive rate.