Did you know that the government offers different programs to help first time home buyers purchase their first homes? Each program is different. So, it pays to understand what each program entails before you go shopping for your dream home.
What’s on Offer?
For example, many of the Australian states and territories are offering a $10,000 AUD grant to first time home buyers who are purchasing or building a new home. This grant is only available for new homes. If the purchaser is looking for an older home to be renovated, this loan is probably not for you. The name of most government grants change and minor alterations can occur. This is why it is essential that you are up to date on the latest changes to these programs as they can affect your entitlement to the grant. These changes can include eligibility criteria and approved locations.
What Should You do First?
Before you apply for any of these programs there are several things you should consider. This article will delve into some of these considerations. Additionally, you should consult with a mortgage expert or real estate professional before you decide to purchase a home.
Continue reading about the top ten things to look out for when considering a first time home buyers grant.
1/. You must stay up to date on the latest eligibility criteria, name and conditions for the particular program offered in your region as these change often.
2/. Not every real estate agent will be up to date on the latest eligibility requirements. This is why you must consult a home loan expert before signing a contract.
3/. Remember some programs only offer money for new construction and newly built homes only.
4/. Most of these government grants are not available for the purchase of previously lived in properties because the government wants to fund more new homes in the area.
5/. In order to qualify for a program, the new home must be valued at less than the maximum amount, which includes all costs associated with the building. For example, the NSW First Time Home Buyer Grant applies to new Australians homes that do not exceed $650,000, including complete building costs.
6/. The grant is only available to citizens of Australian. Furthermore, all applicants must be older than 18 years old.
7/. Many programs require that all applicants have never owned a residential property in the past.
8/. Most financial institutions and brokers have the paperwork needed to apply for a First Home Buyers Grant. Check with the require application procedures for your region.
9/. Your application can be submitted to the Office of State Revenue 12 months after the purchase of a property or the building completion. However, most experts advise that everything is submitted before a new home is bought or construction starts. This will help expedite the process and minimize the risk of eligibility changes to the program.
10/. Applications made at the same time you are obtaining financing will result in the grant being paid at settlement. If you are building a new home, the grant will be calculated to coincide with the first draw. You will need to carefully manage your budget to ensure the grant payments are acceptable according to the terms of the grant.
It Pays to Stay Up-To-Date
As you can see, there are many things to be aware of when applying for a First Buyers Home Grant in Australia. Use the advice from this article and knowing the top ten things discussed in this article to ensure you qualify and receive your grant. Because the eligibility to these grants changes often, it is essential that you stay up to date. Visit a qualified real estate agent or mortgage broker.
When it comes to buying a home for the first time, it is essential that first time home buyers understand the different types of mortgages available. Because there are so many mortgage programs for first-time homebuyers, the home buyer can become confused quite easily.
First Time Home Buyers- The Importance of Understanding Mortgages
Buying a home is one of the largest investments you will ever make. In fact, you may spend the next 15 or 30 years paying on your mortgage. This is why it is essential to understand the different mortgage terms and how they can impact your financial health as you repay the loan. Continue reading to learn about the different types of mortgages available to first-time home buyers.
What Are the Different Types of Mortgages Available?
There are numerous options that a first time home buyer can choose from when purchasing a home. Some of these mortgages are only available to those purchasing a home for the first time; others are available to anyone buying a home.
Fixed Rate Mortgages
One of the main benefits of a fixed rate mortgage is the interest rate will never change. This means that your mortgage payment will remain the same over the lifetime of your loan. Fixed rate mortgages are great for those who want to be able to budget their money. Furthermore, you can lock in the interest while you are applying for and getting approved for a loan. This means even if the interest rates increase, you will be locked into the lower interest rate. If the rates drop, your lender can get you the lower rate.
Variable Rate Mortgages
With this type of loan, the interest rate varies and follows the changes in the interest rates of the Reserve Bank of Australia. Starting out, the interest rate on this type of loan is typically lower, which results in lower payments in the beginning. However, when the interest rate changes, so do the monthly payments. If you can handle fluctuations in payment amounts and think the interest rates are going to stay low, this may be a good loan for you. Variable rate mortgages can mean lower payments and lower interest rates; however, if there is a change the interest rates may increase, which can increase your payments.
Introductory Rate Mortgages This type of loan, sometimes referred to as a honeymoon mortgage, is designed especially for first-time home buyers. At the beginning of the loan, the interest rate is discounted to keep payments affordable. After the honeymoon period ends, which is generally twelve to thirty-six months after the loan begins; the home buyer will be charged the standard rate on variable loans. This program was designed to help increase homeownership by offering affordable payments. As you advance in your career, you will be better prepared to pay a higher interest rate once the honeymoon period ends.
Low Deposit Mortgages
Low Deposit mortgages are another great mortgage option for first time home buyers. These loans are perfect for those who have a good income but do not have a lot of money in savings. The down payment on these loans can be as low as 5 percent of the purchase price.
Low Doc Loans
This type of loan is great for those who are self-employed or cannot provide the necessary documentation to prove their income level. If you have good credit and a healthy deposit but cannot provide the necessary documentation, this may be the best loan for you. These loans do require a higher down payment and generally, have higher interest rates due to the greater risk of this type of loan.
If you are interested in building a home and buying a piece of land, a construction loan may be the best choice for you. With these loans, the builder is paid in installments, called progressive drawdown’s as the different phases of construction are completed. While the home is being built, you will pay interest only payments based on the amount of money that has been drawn. This is a great way to purchase land and have a home built.
Get Help in Making the Right Choice
The aforementioned loans are just a few of the many different types of loans available to first-time home buyers in Australia. Before you agree to a loan and sign the paperwork, make sure that you understand the loan repayment guidelines, the payment structure and the terms. For best results, find a mortgage lender who takes the time to answer your questions and who you feel comfortable talking with. This will ensure that you get the best loan based on your unique financial situation.
What do Lenders Look for?
Most first home buyers wonder whether they can really afford to buy their own house. Even though most lenders have calculations and ratios that can help you as a buyer determine if you can afford a home, it is still more complicated than this. You have to always remember that the lenders usually look at your ability to repay your loan. To do this, they examine debts on record including credit cards, school debts, or auto loans. They will then compare these obligations to your current income.
What do I Need to Know?
However, there are some things lenders do not consider in their calculations. These factors include how much you want to save for retirement or for emergencies and lifestyle choices for example how much you need to support your desired lifestyle. It is only the buyer who can determine their needs.
This is why it is a good idea for first-time buyers to have a rough idea of the home they can easily afford without straining their budget. As a first time buyer, you have to also know if you are willing to make any sacrifices to achieve the dream of home ownership.
Examining Income vs. Expenses
First of all, you have to examine your current income and expenses before looking for any houses. Ask yourself whether you can pay all your expenses and still save some amount each and every month. Are you comfortable or are you barely managing?
Remember that even if you are living on your own and paying rent, owning a home can become more expensive. This is because of the additional costs associated with home ownership including utilities, insurance, repairs and maintenance and unexpected costs.
The Biggest Challenge
The most challenging thing for first-time buyers is the deposit or down payment. It is usually recommended that you pay for about 10-20% of the buying price as deposit. For example, a house worth 500,000 dollars will require a down payment deposit of about 50,000 to 100,000 dollars. If you are able to afford a 20% deposit, you will be in a much better condition to handle the cost of ownership.
How do You Calculate Mortgage Payments?
Lenders usually prefer mortgage payments which are not more than 35% of the buyer’s gross monthly income. To calculate your maximum monthly mortgage payment, you need to multiply your gross monthly income by .35. This number is the maximum monthly mortgage payment lenders will likely qualify you for.
What is the impact of the deposit on the monthly mortgage payment?
One of the best ways of reducing a monthly mortgage payment is providing the biggest down payment deposit you can afford. The deposit will reduce the amount of the loan hence reducing the monthly payment. Larger deposits will give you the buyer, better loan terms and lower interest rates. This will help save thousands of dollars over the lifetime of the loan.
A First Home Owner Grant can Help You get into a New Home.
It can be very hard for most buyers to save up to 20% of the purchase price. Even without the 20%, you can still manage to get a mortgage. The only difference is that your terms will be different from those of buyers who can provide the 20% deposit.
One of the best ways to make home ownership more affordable for a first-time buyer in Australia is qualifying for The First Owners Grant. This grant program provides up to 10,000 dollars in cash and stamp duty concessions for qualified individuals.
Because it is a grant program offered by the government, it does not need to be paid back making it more affordable to buy a home.
Don’t set your sights too high.
One of the major reasons why most first home buyers get discouraged is because they set their sights too high and look at houses that are out of their price range. Find the maximum amount of affordable mortgage and look for properties within that range. You can find several starter properties by just looking around. Homeownership usually requires a significant amount of financial investment. The best thing to do, therefore, is to wait until your finances are stable and can meet your income requirements before delving into home ownership.
Rent until you can save the 20% deposit, pay down your debt and have a stable income to help make the process of buying a house much easier.
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What do the Numbers Say?
According to recent statistics, a good few people buying homes are first time buyers. However, the research continued to mention that because many of them investing in residential property are not yet experienced or established in their career, they end up only affording a small home.
The survey has also shown that most of these first time home buyers still rely on their parents for funding their new house as well as paying for their deposit.
Where does the Money Come From?
According to another survey from Realestateview.com.au under the topic ‘Housing Sentiment Report’ mentions that 19% of buyers rely on their parents through borrowing money, living with them or simply using them as guarantors. Buyers from Victoria; 23.7% were found to rely on their parents, compared to those in NSW, which is 15.8%.
It continued to mention that nearly half (42.6%) of first home buyers heavily depend on their parents to enter the property market. The research mentioned that 14% of first home buyers borrow money from their guardian to pay their homes deposit; 13.2 % live with their guardians while investing. 15.4% of them use a parental guarantor to secure a property loan.
Are You One of the Good Savers?
On the other hand, not all first home buyers depend on their parents when investing in the housing market. Research has shown that more than half (59%) are buying their homes through savings (saved money for that). 14% are saving through a first home saver account. Generally, 5% – 20% deposit is needed when purchasing a home. The good news is that, if you do not have any deposit ready, you can still have other options.
- Using Parental Guarantee
One of the methods and widely used is getting a parental guarantee. What does this mean? Well, it simply means that one can use a guarantee from their parents as equity to help them with their home purchase. The warranty needs to be supported by a mortgage over their parent’s property or their term deposit.
The ‘Housing Sentiment Report’ also mentioned that 43.2% of Victorians do save money through regular savings account compared to those from NSW, which is 31.6%. This trend was recorded when it came to selling property and using the amount received to buy another house.
- Deposit Bonds
This is another option which does give a person the opportunity to buy a property if they are unable to deposit cash. The truth is that this is useful; though, if a person is eligible for the first home buyers grant, or the cash you have is linked to another investment.