Buying a home can be a daunting process, particularly if it's for the first time. A recent study by Lendlease shows that 80% of those aged 18-25 still dream of buying a home, and 47% of those think they'll do it within the next five years.
We're here to help walk you through the process of buying your first home, including when is the right time to get your foot in the property market, and which grants or schemes may be available to help you get there.
Is now a good time to buy a first home?
The latest Australian Bureau of Statistics (ABS) data for April 2020 shows First Home Buyers across Australia have continued to flood the market, and now account for around 32% of the owner-occupier market.
If you’re considering buying your first home, you’re in luck. With record low interest rates, sellers keen to find new buyers and government support available for first homeowners, now could be a great time to enter the property market.
Buying a first home through the first home owner grants (FHOG)
First Home Owner Grants exist to help first home buyers in different states and territories throughout Australia with varying grant sizes and stamp duty exceptions.
As long as you meet certain criteria (being over 18, have not owned a property before, intend to live in the home for at least six months after, the house must be brand new and not exceed a certain value etc.), then the state-based grants can give you a cash handout as big as $20,000 to help with a deposit:
NSW first home buyersUp to $10,000, buying or building a new home that no-one has lived in before
VIC first home buyersUp to $10,000 in Melbourne, $20,000 in regional Victoria, the first sale of a house, townhouse, apartment, unit or similar as a residential premises and the property must be less than five years old
QLD first home buyersUp to $15,000, buying or building a brand new home and live there continuously for 6 months
ACT first home buyersUp to $7,000, buying or building a new home, substantially renovated home or off-the-plan home
WA first home buyersUp to $10,000 (eligibility differs upon location), buying or building a new home. A home that has been substantially renovated may be considered a new home.
SA first home buyersUp to $15,000, buying or building a brand new home and live there continuously for 6 months
TAS first home buyersUp to $20,000, available to eligible applicants who purchase or build a new home in Tasmania before 30 June 2022
NT first home buyersUp to $10,000 (no limits on value), buy or build a new home
Grants of around $10,000 - $20,000 could be extremely helpful in helping you save for a deposit. What can be even more helpful is the stamp duty exceptions these grants may provide. Stamp duty can cost tens of thousands of dollars, but if your property is below a certain value, then you can have it reduced or waived entirely.
For information regarding eligibility for the FHOGs depends on your state and other criteria, which you should check on your relevant state Government's website.
Another scheme that can help first home buyers enter the market is the recently announced HomeBuilder scheme.
Building a home through the HomeBuilder scheme
Recent reports show that young Australians are skewed more towards building a new home (58%) than buying an existing one (42%). Building can have its advantages: You can have a greater say in what your house looks like and where it is, and can result in smaller stamp duty costs. On the other hand, building can be more expensive than buying on average, and can take longer, while buying one lets you buy an existing house that might be in a more desirable location.
In June 2020, the Federal Government announced the HomeBuilder scheme, a $25,000 tax-free grant for new home builds and renovations. This could provide another useful grant for those looking to build their first home, as long as they meet the criteria. To be eligible for the HomeBuilder scheme, you must:
Be an Australian citizen aged 18 years or older;
Be on an income of less than $200,000 for couples, and $125,000 for singles;
Be building a new home worth less than $750,000 (including land value);
Intend to live in the property (not an investment property)
So if you’re building a property worth less than $750,000 including the land, and have a settled contract by 31 December 2020, then you could receive a $25,000 to help get started. This grant can also be used alongside the First Home Owner grants, while some individual states have since introduced their own building grants worth around $20,000 each.
If you’re looking to build your first home, then compare some of loans.com.au’s construction loans today.
How to save up for a house deposit
According to Lendlease’s study, 55% listed saving for the house deposit as a struggle on the path to homeownership. A 20% deposit on that national median house price of $550,000+ is more than $110,000, so saving up for this can take years.
The top five ways young Australians are saving for a house deposit, according to the study, are:
Cutting back on small expenses
Saving money with their partner
Opening a specific savings account
Sacrificing a luxury expense
Starting a side hustle.
The cheaper the home, the smaller the deposit, so looking at lower priced properties could make it easier to save up for a house deposit, helping you enter the property market sooner.
Get home loan pre-approval
If you’re ready to take the plunge and enter the property market for the first time, then consider getting pre-approved for a loan. While not a guarantee of finance, pre-approval is an indication from your lender of what they’re willing to lend to you, so you can know what you can and can’t afford before you go looking for your dream home.
To get started on buying or building your first home, book an appointment with one of our friendly lending specialists to get pre-approved.
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