Buying your first home can be both exciting and overwhelming, but with the right information, you can make the right process go smoothly. If you have been researching about buying your first home, chances are you’ve come across terms such as first home buyer loan or first home buyers grant, among many other “options”. We understand that more often than not, it can get difficult to cut through all the industry jargon and the different options available to you to find the perfect home loan that is tailored just for you.
Let’s be honest, having options is great but it’s important to know what each one is. A loan that may be perfect for one person may not be suitable for another’s needs.
Buying a home will likely be the most significant investment you’ll make, especially as a first-time buyer trying to break into such a competitive Australian property market. Therefore, you need to make sure you nail down what you want out of your loan.
It’s completely normal to be overwhelmed, but we’ve compiled this guide for buying your first home full of all the good stuff like:
- What are the first steps?
- What discount rates, loans or fees might be available?
- What changes are happening in the Australian market?
- Terminology that will help you along the way.
All about first home buyer’s definitions
Before we get into the real juicy stuff, we want to first cut through the jargon and technical mumbo jumbo and clear up a few misconceptions of the technical definitions.
Why is this important?
Well, take for example the definition of a first home buyer which seems pretty straightforward ‘a person buying a home for the first time’ but in fact, you must fit certain criteria to be classed as a first home buyer.
First things first, what is a first home buyer in Australia?
To qualify as a ‘first home buyer’ in Australia you must:
- Be purchasing your first home.
- Move into the property within 12 months.
- Live in the property for at least 6 continuous months.
Although these vary from state to state. You should always check the eligibility within the area you wish to purchase or contact a professional financial broker or financial adviser that can offer you advice and clarification regarding this.
What is LVR on a home loan?
LVR stands for loan-to-value ratio on a home loan. Simply put, it is the percentage figure that is calculated by your lender to weigh up how much they are willing to loan you against the total value of the property.
What are the home-buying costs for first home buyers?
There are a few buying costs you may have to pay when buying a home these include Bank costs, Stamp duty, Lenders Mortgage Insurance, Government Costs and conveyancing.
The most important costs to consider when considering a First Home Buyers loan or grant are Stamp Duty and Lenders Mortgage Insurance (LMI).
Again, these vary from state to state, consult an advisor or mortgage broker that can help you determine what home buying costs you may need to consider when purchasing your first home.
What is Stamp Duty?
Stamp duty (also known as transfer duty) is a type of tax imposed by the state or territories during the sale and transfer of property and land. The amount of stamp duty varies by state and territory, but more on that later.
What is Lender Mortgage Insurance (LMI)?
Lenders Mortgage insurance is an insurance policy for lenders to protect themselves against the risk that a borrower defaults on the home loan repayments.
And remember! LMI in some cases can be avoided. It is always best to speak to a broker who can find out if you can avoid paying LMI which can save you thousands.
Now that we’ve cut through some of the fancy definitions and hopefully taken away some of the mystery behind the costs and what they mean, let’s talk about what your initial steps are when considering buying your first home.
How to apply for a loan as a first home buyer
Before looking at the types of loans available to you and even before viewing properties there are a few things you should consider doing first:
Get in touch with a broker and check your borrowing power
Your borrowing power is the calculated maximum amount you’ll be able to borrow for a home loan based on your income, household expenditures and deposit size. Before anything, get in contact with a broker to discuss your options and also claim your goals and objectives. During this process, the broker will be able to assess your true borrowing capacity and let you know what options are available. A great mortgage broker will sit down and come up with a plan going forward based on what you want to do.
Get pre-approval before looking at properties
It is easy to get swept up in the romanticism of it all and forget about your borrowing capacity. As boring as taking a cautious approach may sound, before looking at properties look to get pre-approval. With pre-approval you know what properties to go for and what your borrowing capacity is before.
Check the eligibility criteria for the property you are considering
Depending on the type of property and the location there are certain conditions, and each lender will have specific eligibility requirements you’ll need to meet.
Get your documents ready to hand
Your broker will let you know what documents you will need and when they will be required. Document requirements will include (but are not limited to):
- Forms of identification.
- Employment proof and recent payslips.
- Any details of your assets and your financial situation, including debts or lines of credit.
Find the right home loan
Last but certainly not least, find the right home loan based on your circumstances and needs. Your mortgage broker will help you compare a wide range of home loan products and look at the interest rates, fees, repayments type, loan terms and loan features.
Your broker will look at all the information they have collected through your chats and find the perfect loan for you based on your circumstances, what you want in a loan and what will help you achieve your goals.
Need assistance in finding a property? Contact us today.
At Finselect, as a broker, we have relationships with real estate agents, solicitors, conveyancers, and Buyers Agents to help assist in finding a property. We are more than happy to point you in the right direction to help you on the journey to find the property of your dreams.
What is a first home buyer loan?
Technically, there isn’t such a thing as a ‘home buyer loan’ from a bank. What do we mean by this? Well, although some banks may offer sign-up incentives, discounted rates and fees for first-home buyers, government incentives are where the real discounts and concessions apply.
What is a home loan deposit?
A home loan deposit is your initial contribution to your property purchase. Your deposit demonstrates your ability to save and provides security for the lender that is potentially granting you a home loan. Generally, some form of deposit is required before buying a loan, but the amount is often dependant on your personal circumstances and your borrowing capacity.
Now that we’ve cleared a few things up let’s get on to why you’re here – finding out about First-Time Home Buyer Loans.
Government support for first home buyers
Contrary to popular belief, there has never been a better time to buy in Sydney.
How, you say? With the current property prices skyrocketing this may come as a shocking statement, as even a modest 20% deposit is often beyond the reach of many home buyers. It also used to be a rule of thumb that 20% of the property value was required to prevent you from paying Lenders Mortgage Insurance (LMI).
However, the federal and state governments are now providing schemes and grants such as the First-Time Home loans and First Time Buyers Grant and with the Government, giving potential first-time buyers a helping hand. With Government assistance, it has never been more affordable to purchase a home in Sydney as a first home buyer in history.
Let’s take a look at some of the grants that may be available to you.
First Home Owner Grants (FHOG)
What is The First Home Owners Grant?
The First Home Owners Grant (also known as the first home buyers grant) is a one-off lump sum paid by the Government towards your home loan for a new home.
To be eligible the property you are buying must fit certain criteria. Each state and territory impose slightly different rules regarding borrower and property eligibility. If you want to apply for your state or territory’s FHOG, be sure to check the current rules and eligibility requirements to make sure you still qualify.
How do you know if you’re eligible for the First Home Owners Grant?
Although varying eligibility rules vary individual states and territories, to be eligible for a First Home Buyers Grant you must:
- Either be building or buying a brand-new home.
- At least one of the applicants must be an Australian citizen or permanent resident.
- + 18 years of age.
- You or your spouse must not have previously owned a home before 1st July 2000.
- You must live in your home within 12 months of construction or purchase.
- You must occupy your home for a minimum of six months a year.
There are other rules that apply depending on the type of property. For example:
- Contract for the purchase of a new home.
The purchase price must not exceed $600,000.
- Comprehensive home building contract.
The property value (house and land) must not exceed $750,000.
- Owner builder.
Property Value (house and land) must not exceed $750,000.
Disclaimer: Eligibility can change anytime. Correct as of 10/05/2023. For more information, visit the New South Wales Government Revenue Website. First Home Owner (New Homes) Grant.
How much can I get from the Government for First Time Buyers Grant in NSW?
In New South Wales, you can receive up to $10000 from the First Time Owners Grant scheme, if you are buying your first home.
What type of property falls under the First Time Buyers Grant in NSW?
Your new first home can be a house, apartment, or unit that is newly built, purchased off-plan or substantially renovated.
Disclaimer: Eligibility can change anytime. Correct as of 10/05/2023. For more information, visit the New South Wales Government Website. First home buyer grants and assistance.
The First Home Guarantee (FHBG)
A very common scheme at the moment is the First Home Guarantee Scheme. The FHGB helps first home buyers get on the property ladder sooner. With the First Home Guarantee Scheme, if you put down 5%, you’ll pay no LMI (lending mortgage insurance).
The only cost that comes in addition to this is dependent on the purchase price. This works in conjunction with the First Home Buyers Choice, whether you can either pay stamp duty or opt-in for land tax.
What is The First Home Guarantee?
The First Home Guarantee is a program introduced by the Australian Government that helps first home buyers buy a home with a small deposit. Thanks to the First Home Guarantee Scheme, some eligible first home buyers will only need to cough up 5% of a property value before they can purchase their home.
How does the First Home Guarantee Scheme work?
With the First Home Guarantee scheme, eligible buyers can purchase or build a home without the need for lenders mortgage insurance (LMI). It works as follows:
- A 5% deposit is contributed by the buyer or as little as 2% for eligible single parents.
- A maximum of 15% of the property values is ‘guaranteed’ and contributed by the Government.
This Guarantee is not a cash payment or a deposit for a home loan.
Am I eligible for the First Home Guarantee Scheme?
The eligibility requirements for the First Home Guarantee Scheme include:
- Being an Australian Citizen.
- +18 years of Age.
- Earning less than $125,000 as an individual applicant or less than $200,000 as a joint applicant.
- Intending the property to be owner-occupied (not renting it out).
- Not owning any other property in Australia.
What type of property falls under the First Home Guarantee Scheme in NSW?
To fall under The First Home Guarantee Scheme the property must be either:
- An existing house, townhouse or apartment.
- A house and land package.
- Land and a separate contract to build a home.
- An off-the-plan apartment or townhouse.
Mortgage expert tips & tricks:
It is important to note that different postcodes and areas have varying property price caps for eligibility. Before applying for the FHBG check the price cap of the desired area you wish to purchase or ask your mortgage broker.
How do I apply for the First Home Guarantee Scheme?
You can only apply for the First Home Guarantee Scheme with a participating lender or a mortgage broker (also known as an authorised representative). It is important to remember that NHFIC does not accept personal applications for the HGS or provide personal financial advice.
To get personal financial or legal advice and apply for the First Home Guarantee Scheme contact a mortgage broker that can talk through the different schemes and advise you if the First Home Guarantee Scheme suits your personal circumstances and objectives. If it does not, they can also point you in the direction of a scheme that can.
Let’s delve further into the current structure in place for the First Time Buyers Loan
Stamp duty discounts
As mentioned earlier, stamp duty is a type of tax imposed by the state or territories during the sale and transfer of property and land. Generally speaking, when you purchase a home, you must pay stamp duty. Stamp duty can be expensive, although with the First Home Buyers Guarantee many states and territories offer stamp duty discounts and concessions that can save you hundreds or even thousands of dollars.
Disclaimer: This may change at any time. Visit your government website or your state or territory revenue office website for more information on whether you may be eligible for stamp duty discounts and exemptions.
What does this mean in brass tax?
In New South Wales, depending on the value of the property you wish to purchase, you may be eligible for stamp duty discounts. Some eligible first home buyers can either receive a concession on stamp duty or pay no stamp duty at all.
Let’s break it down a little. Currently, in NSW:
- A property of up to 650,000 purchase = $0 stamp duty.
- A property with a value of $650,000 – $800,000 = discounted/concessional amount on stamp duty.
The closer to 800,000 the less of a discount. The closers to $650,00 the higher the discount.
- $800k+ property value.
You pay full stamp duty and there is no discount (July/June) – remove the home buyer.
What about Lenders Mortgage Insurance (LMI)?
Generally speaking, if your LVR (loan-to-value rate) is above 80, meaning your deposit is below 20%, your lender often pays your Lenders Mortgage Insurance as a condition of your home loan.
Having to pay LMI can drive up your loan amount, and ongoing costs and could affect how quickly you can get on the property ladder. All-in-all LMI can often be overlooked by first-time buyers but it can be the difference between being able to purchase your home or not being able to.
Before we get all doom-and-gloom we have to remember that there is help at hand.
As mentioned above the First Home Buyers Guarantee helps with both the mortgage deposit by guaranteeing up to 15% of your property’s value and how much LMI you need to pay.
So, what does this mean?
FHBG often requires as little as 5% on your end. If you put down 5%, you’ll pay no $ 0 LMI (lenders mortgage insurance).
Here is an example of how these grants work based on our experience.
| Good outcomes using grants example 1: First home buyers choice + 5% first home buyers deposit scheme working together The client all in all purchased the property for $700,000 with all costs included. They borrowed 95% of that purchase price and paid no land and mortgage insurance (LMI). The client decided to opt in for the land tax rather than paying stamp duty. A great outcome with all costs included it cost the client only $36,000 (including deposit) key in hand including bank fees and legals. |
These are the two schemes that we’re seeing work in conjunction together more frequently. There are a lot of other schemes out there at the moment such as Regional First Home Guarantee and Single Parent Guarantee Scheme. These are all things to consider. It is best to sit with your broker to discuss the true benefit of what you can leverage during your transaction.
Mortgage expert tips & tricks:
It’s important to remember that with all these schemes and grants some terms and conditions apply such as income caps. For example, as a single applicant or single parent (Single Parent Guarantee Scheme).
Let’s take a look at the lesser-known first home buyer schemes.
Regional First Home Guarantee
What is the Regional First Home Guarantee?
The Regional First Home Guarantee is part of a home guarantee scheme which is an Australian Government initiative. It aims to support eligible regional first home buyers to purchase a home in a regional area sooner. It acts the same as a First Home Guarantee but for regional areas.
Just like the First Home Guarantee you can put down only a 5% deposit contribution and pay no LMI.
Am I eligible for the Regional First Home Guarantee?
To be eligible for the Regional First Home Guarantee home buyers must be:
- +18 years of age.
- An Australian citizen at the time of entering the loan.
- Have not previously owned a property in Australia.
- For individual applicants you must be earning up to $125,000.
- For couples (married/de facto) you must be earning up to $200,000.
- Intending the purchased property to be owner-occupied (you live in the property).
- Lived in the regional area of the property for 12 months from the home loan data.
- If purchasing as a couple at least one borrower must have been living 12 months in the area.
Mortgage expert tips & tricks:
It is important to note certain areas are excluded from the RFHBG. These include the greater capital city areas of each state and the Northern Territory and the entire Australian Capital. If you are purchasing in these areas, you may instead be eligible for the First Home Guarantee or Family Home Guarantee. Talk to a mortgage broker who can advise you on the best scheme for you and point you in the right direction.
What property types fall under the Regional First Home Guarantee Scheme?
The property types that home buyers can purchase under the Regional First Home Guarantee Scheme include:
- An existing home, apartment or townhouse.
- A house and land package.
- Land with a separate contract to build a home.
- An off-the-plan townhouse or apartment.
Mortgage expert tips & tricks:
Certain property price caps, timeframes and criteria apply to different property types and locations. Contact a mortgage broker that can advise you.
How can I apply for a Regional First Home Guarantee Scheme?
You can only apply for the Regional First Home Guarantee Scheme using a participating lender or a mortgage broker. Home buyers considering the Regional First Home Guarantee Scheme should consider seeking independent financial and legal advice and have a chat about the potential implications of changing interest rates and house prices based on individual circumstances.
Single Parent Guarantee Scheme/ Family Home Guarantee Scheme (FGH)
What is the Single Parent Guarantee Scheme?
The Single Parent Guarantee Scheme, also known as The Family Home Guarantee, is basically the same as the First Home Guarantee Scheme, but single parents can contribute a 2% deposit instead of a 5% deposit.
Under the Family Home Guarantee Scheme (FGH) each year eligible parents will be able to contribute as little as 2% deposit and the government will guarantee the remaining 15% to save the borrower needing to pay LMI (lenders mortgage insurance).
This will be running every year with allowances of 5000 single parents per year. This scheme started on 1st July 2021 and is looking to run until 30 June 2025.
Am I eligible for the Family Home Guarantee scheme?
To be eligible for the Family Home Guarantee you must:
- Be single with no spouse or de facto partner.
- If you have been previously married, you must not be separated and you must be divorced from a former partner. A separated single is not considered single.
- Have at least one dependent child (natural or adopted).
First Home Super Saver Scheme (FHSSS)
Another lesser-known scheme is the First Home Super Saver Scheme (FHSSS) which allows first time buyers to voluntarily contribute their superannuation fund’s balance (before or after tax) which would form part of their home deposit.
Under the First Home Super Saver Scheme, $15,000 worth of your super contributions can be made per year, up to a total of $50,000 across all years.
A few rules for the First Home Super Saver Scheme (FHSSS)
- You can only request a release under the FHSSS scheme once
- Your withdrawal may be offset by the amount you owe if you have any outstanding government debts (not including HECS or HELP debts).
Purchasing a property from an Auction
In today’s climate, it is very common to purchase a property from an auction.
During an Auction, it is easy to get lost in the hype and get carried away from what amount you should purchase the property at to beating the last bid.
At Finselect, we work together with our clients to that they can take with them to the auction so they can weigh up their options. The information on this sheet includes important things that may factor into the decision to bid or not to bid such as providing the monthly repayments based on varying purchase prices.
The document provides clear information so that when you are bidding you can see what the monthly repayments are increasing to and help you weigh up if you wish to bid more.
For example: Say you want to purchase up to 1.1 million dollars and the bidding opens at 900,000. They can look at the sheet and say ‘I’m going to go 950.000’ and bid and clearly see what your monthly repayments will be doing so.
It’s easy during the excitement to go from 1 million to 1.2 million by a flick of your hand without knowing what this will truly cost in the long run. We don’t like to be the fun-police but sometimes it helps to have this information in front of you and realise that 200,000 may cost you 1,200 or more in monthly repayments.
Another great benefit of having this document readily available is that the majority of auctions happen over a weekend, and a lot of brokers don’t work on the weekend.
We don’t think it’s worth you missing out on a house because your broker didn’t answer the call whilst at auction.
That’s why at Finselect, we’re different. We are available for our clients whenever they need us, including at the weekend. So, if you’re stuck or need some more advice during a weekly auction, we’re there available to give you instant answers. No need to wait for the following Monday and miss out on the bid!
Mortgage expert tips & tricks:
Another thing that buyers often do not know about attending an auction is that contracts are negotiable. Before a client goes to an Auction, we recommend getting a blank copy of the contract from the real estate agent that’s managing the property and having a property conveyancer or solicitor look over and give verbal advice on the contract.
Why do we recommend this? Well, during the auctions there has to be a deposit left on the day- whether that’s 5% or 10%. Some contracts will start at 10%. For first home buyers that are looking at taking advantage of the 5% scheme that contract obviously isn’t going to work because if the client is proceeding with the 5% First Home deposit scheme and because they don’t actually have the 10%, they’ll need the contract negotiated by their conveyancer to be able to only provide 5% on the day rather than the 10%.
The property conveyancer or solicitor’s job will be to contact the vendor and let them know that you are looking at attending your auction and are interested in the property, however, as part of their contract will be that they will only provide a 5% deposit and if this will be accepted.
All in all, the important thing to take away is that contracts for sales property are negotiable. It’s not what you see is what you get.
Lost and need some advice on how to contact a solicitor or conveyancer? Unsure where to go and who you can trust. We’ve got you.
At Finselect, as a broker, we have relationships with real estate agents, solicitors, conveyancers, and buyers agents. Whatever the service you need, we’ve got you covered. We are more than happy and more than capable to find you the best property-buying experts to help you buy your first home.
More about conveyancing
It is so easy for those in the biz, to say ‘consult a conveyancer’ but when it comes to so many people you have to consult and what they do it can get confusing.
It is normal to feel a little lost and confused. How do you know who to contact and what you need if you don’t know what they do and their purpose?
So, let’s talk all about conveyancing. A thrilling topic I know.
What is a conveyancer?
A conveyancer (sometimes a solicitor but not always) is a legal professional that checks all the legalities of the contract of sale (your home purchase or home loan contract). They will also help carry out due diligence on the property and help the process run smoothly. A conveyancer also helps navigate all the legalities of transference of ownership of the property between the buyer and the seller.
Let’s be honest, unless you’re a lawyer by trade trying to navigate the legalities and the process of home buying can be puzzling. That’s where a mortgage broker can help.
Why is a mortgage broker needed?
The process of buying a home can feel a bit like putting a puzzle together. Fitting together the pieces in the right place so the process runs smoothly. It’s all about getting everything in the right place and the right order. That’s where a mortgage broker can help.
What does a mortgage broker do?
A mortgage broker assists individuals to apply for mortgage financing and purchasing financial products. They also facilitate all financial needs by sourcing all bank loans, financial products, interest rates and financial service providers that may be of interest to the individual based on their individual circumstances.
A mortgage broker works as an intermediary go-between for banks and those wishing for financial assistance, financial products and financial services to help guide you towards the best loan or product available that best matches your wants, needs and circumstances.
A mortgage or financial broker often has a portfolio of financial service providers with products and services that you can discuss.
A mortgage broker has relevant experience, knowledge, and expertise in the residential loan market to understand the best, most suitable loan from their array of lenders.
Using a mortgage broker can often cut out the headache and cut down the complex, time-consuming process of trying to navigate the wide array of financial providers and services they provide, which can help save you money in the long term.
Here are a few more ways a mortgage broker can help:
- Mortgage brokers act as the main point of contact between you (the buyer), the lender and their solicitors or conveyancers.
- Mortgage brokers can look over contracts with a fine-toothed comb to check everything is above board.
- Mortgage brokers can help complete and send off any legal documents
- Can discuss what schemes are best for you and discuss stamp duty, lenders mortgage insurance and ensure that all your options are laid out for you
- Help you successfully settle property transactions without any hitches or roadblocks
How do you decide which loan is best suited to my personal situation?
At Finselect, we decide which loan is best suited to your personal situation by checking what schemes or grants you are eligible for and what your loan repayments will be, to see if it is feasible and if you are comfortable with the repayment amount. We will collect and consider all your details, your wants and needs and choose the best loan that will achieve the best outcome for you and/or your business.
Do I need a mortgage broker to buy a property?
You are not legally required to hire a mortgage broker when purchasing a property. However, mortgage brokers can save you significant time and money and stress that you may encounter by doing it all by yourself.
It is never great to feel you are all alone and unsure of what the home buying process entails, the grants available, and end up missing an important step, deadline or obligation that could end up losing you your deposit, the house and money down the line.
It is tough juggling all the legal and financial loose ends that are involved in purchasing a home, especially as a first home buyer. We hope you have found this article of help and that it has helped cut through the tape to help demystify the first home buying process and help clear up some of the main schemes that may be available to you and what each one entails.
Buying your first home is an exciting, worthwhile investment and no doubt will be one of the biggest financial decisions you’ll make in your lifetime. The pits and pitfalls of your first mortgage can be a huge learning curve and can often be daunting. That’s why it pays to have someone on your side through your buying journey.
Why FINSELECT?
We make sure you understand the process every step of the way. At FIN Select, you are our #1 priority. We work for you not the bank, not the vendor and not the estate agent. We offer flexible and compelling first home buying loans to make your dream home investment a reality. We offer fixed rates, flexible rates, standard variable rates and poor credit lending. We take the time to listen to what you need and use our knowledge, experience and strong network within the constantly growing and evolving mortgage and finance space to identify the optimum product for you.
Explore our market-leading investment loans features:
- Flexible home loan options and solutions
- We don’t discriminate- we listen to your story and we provide tailored solutions for you.
- No obligation check that doesn’t affect your credit rating
- Take the stress out of borrowing allowing you to enjoy the first home buying process
Our specialist mortgage and finance brokers can help advise on the available government schemes for first time home buyers for you with you and your goals in mind.
Securing finance doesn’t need to be a complex ordeal. We are a finance brokerage service for everyday Australians passionate about educating people on building wealth and paying their mortgages faster. No guesswork, no hassle, just transparent, personalised solutions offering clarity and control to get you and your finances ahead.
We understand that buying your first home can sometimes seem confusing and overwhelming. We offer transparent advice and secure, government-guaranteed backed funding. We never offer you services you don’t need. We offer simple, no-strings-attached first home buyer options to suit you and your individual circumstances.
No tricks, no hidden costs, just helpful advice and a complete lending solution tailored to your goals.
Don’t risk your future, work with the best. Our track record doesn’t lie! We are trusted and have a close relationship with over 50+ lenders. We don’t believe in surprises- we offer transparent, accurate and fair lending solutions from our years of experience and knowledge of the constantly growing, evolving financial market to identify the optimum product for you.
Take the Stress out of your new purchasing journey
Contact us today.
Fill in our handy online form. Call us on 1300 346 735 or shoot us an email at info@finselectgroup.com.au.
