Owning a home is a goal that many will have during their lifetime. For some, home ownership is more than just having a secure long-term investment, it's about the sense of accomplishment and the freedom that it comes with.
With your goal set, you'll likely be planning the best approach to securing your first home. Although you may be able to afford to repay a home loan, often the biggest hurdle will be coming up with a deposit.
Most banks will generally require a 20% deposit towards the home you wish to purchase. The problem is that at today's property prices that amount can be a lot of money.
If you're struggling to come up with a high deposit, here are some alternative options you can consider...
1. Family Guarantee Home Loans
Family guarantee home loans have become a popular way for family members to help each other into the property market. If you have a family member who owns their home either outright or has equity available, they may be able to use a portion as security towards your home.
This can allow you to get a home loan with little to no upfront deposit required. So instead of you only being able to borrow 80% and the need to provide a large deposit, with your parents home as security you may be able to borrow up to 100% of your new homes value.
Generally, family members who can guarantee your home loan can be parents, siblings, partners and grandparents.
2. Borrow 95% with Lenders Mortgage Insurance
Some lenders will allow you to borrow up to 95% of your new homes value. This means you may be able to purchase with only 5% deposit. There are however some conditions you will need to consider.
The lenders will want to make sure you have the capacity to repay substantial debt. Without a strong savings history, they may require you to have a proven rental history with consistent repayments.
You will also need to pay Lenders Mortgage Insurance (LMI). This protects the lender and ensures the lender is covered if in the instance you were unable to meet the loan repayments and the net proceeds from an enforced sale was not enough to cover the loan. LMI may range between $7,000 to $15,000 or more.
3. First Home Super Saver Scheme
In 2017 the First Home Super Saver Scheme was introduced by the Australian Government. The FHSS scheme allows first home buyers to save money inside their superannuation fund. This can help buyers to save for a deposit faster.
With the FHSS scheme you can make voluntary contributions into your super of a maximum of $15,000 per year and up to a total of $30,000 contributions across all years. These funds can then be used towards your deposit when needed.
4. Consider a Cheaper Home
If you already have a substantial amount of savings available but it's still not enough for your preferred home, then you could always consider a cheaper alternative.
You need to determine what is more important to you. Will it be entering the property market, or waiting until you have enough deposit? Holding off may mean property prices rise and may leave you further away from achieving your goal.
By purchasing a cheaper home, you may be able to get into the market sooner, take advantage of Government first home grant incentives and allow your home to grow in value. Eventually, you may be able to rent out the home or sell for a profit and use the funds to upgrade to your dream home.
5. MWC's Low Deposit Home Solution
Our Low Deposit Home Solution is designed especially for home buyers with a low deposit. We make this possible by connecting our buyers with lenders who will lend up to 95% and using Government first home grants towards your deposit.
What about Lenders Mortgage Insurance? We provide $10,000 as a gift to eligible home buyers to help cover additional expenses. This will allow you to get into your home sooner with less savings.
Helping buyers with a low deposit is our specialty and we provide a free service to make the journey simple. If you're serious about buying a home, then we can provide you with a strategy that will enable you to do so.
free starter kit!
Considering home ownership? Our FREE Home Buyer Starter Kit is full of educational topics that will enable you to take confident steps forward as a home buyer. Get your free copy today!