Pathways to home ownership in Australia
From securing pre-approval to accessing government grants, low-deposit home loans, and leveraging existing property equity, first home buyers can take control of their journey to home ownership. With Buyvest’s expert guidance, you’ll understand your borrowing options, explore support schemes, and plan a strategy to confidently purchase your dream home.
Securing a pre-approval
Securing a preapproval is a crucial step in your home buying journey. It gives you an advantage by providing a realistic expectation of your borrowing capacity, and it shows sellers that you're a serious and prepared buyer and understanding the pathways to home ownership will give you the advantage over the competition. Here is a breakdown of process and schemes to factor through your journey.
Understanding valuation process
Understanding the property valuation process is essential in the home-buying journey. Valuations play an important role in securing finance, as they give an estimate of the property's worth, which in turn affects the loan amount a lender is willing to provide.
First Home Owner Grant (FHOG)
For many first home buyers, accumulating a deposit can be a daunting hurdle. But did you know that government grants, such as the First Home Owner Grant (FHOG), could be used to supplement your deposit? This grant can significantly reduce the amount you need to save.
Stamp Duty Concessions
Stamp duty often represents a significant portion of upfront costs when buying a home. Various state governments offer stamp duty concessions to first-time buyers, which could lower or even eliminate these costs entirely.
Home Guarantee Scheme (HGS)
The Home Guarantee Scheme (HGS) is another supportive scheme for first home buyers. It's designed to help you purchase your home with as little as a 5% deposit without the need for Lenders Mortgage Insurance (LMI). This scheme not only fast-tracks your homeownership dreams but also maintains affordability.
Shared Equity Scheme
The Shared Equity Scheme, also known as the Help to Buy Scheme, helps eligible Australians to buy a home with a smaller deposit. The government contributes up to 40% for new homes or 30% for existing ones.
Guarantor loans
A guarantor loan can be a lifeline for first-time buyers who may not have the required deposit. This type of loan involves a family member, who agrees to guarantee part of your loan. It's an opportunity to enter the property market sooner, and it can also help you avoid the cost of Lenders Mortgage Insurance (LMI).
Low deposit home loans
Low deposit home loans are an option if you're ready to purchase a home but haven't saved the typical 20% deposit. With Lenders Mortgage Insurance (LMI), you can borrow with a smaller deposit. While LMI adds an extra cost to your loan, it enables you to begin your homeownership journey without the wait.
Using existing property equity
If you or your co-borrower already owns property, you might have built up equity that you can use towards purchasing another home. Equity release involves accessing the money tied up in your current property, providing you with the funds for a deposit on your next home. This can be a game-changer in securing your new property.
Loan options for first home buyers
The home loan market offers various products designed to meet the needs of first home buyers:
Fixed-rate loans - Provides payment stability with locked-in interest rates for a set period.
Variable-rate loans - Offers flexibility with rates that change according to market conditions.
Split loans - Combines fixed and variable components to balance stability and flexibility.
Offset accounts - Reduces interest payments by offsetting your loan balance with your savings.
Package loans - Bundles your home loan with other financial products for potential fee savings.
The right loan structure depends on your financial situation, risk tolerance, and long-term goals.
Understanding Loan to Value Ratio (LVR)
Your loan to value ratio significantly impacts your loan terms and costs:
Calculated as the percentage of the property value you're borrowing.
Influences interest rates and loan features available to you.
Determines whether Lenders Mortgage Insurance is required.
Affects your borrowing capacity and loan approval prospects.
Provides a measure of your equity position in the property.
Aiming for a loan to value ratio (LVR) of 80% or less (20% deposit) typically provides the most favourable loan terms, though various schemes and loan products can make higher LVRs more manageable.
Budgeting for ongoing costs
Beyond the purchase price and upfront costs, homeownership involves ongoing expenses:
Mortgage repayments.
Council rates and water charges.
Strata fees (for apartments and some townhouses).
Home insurance.
Maintenance and repairs.
Utilities and services.
Factoring these costs into your budget ensures you can comfortably afford your property in the long term.
Frequently asked questions
What's the first step I should take when considering buying my first home?
The first step should be a comprehensive assessment of your financial situation. This includes reviewing your income, expenses, savings, and existing debts to understand your borrowing capacity. Speaking to one of our expert’s at Buyvest can provide valuable insights into your readiness for homeownership and help identify areas to improve before applying for a loan.
How much deposit do I need to buy my first home?
While the traditional deposit is 20% of the property value, first home buyers have several options for purchasing with smaller deposits:
With the Home Guarantee Scheme, you may purchase with as little as a 5% deposit (or 2% for single parents under the Family Home Guarantee).
The Shared Equity Scheme helps eligible buyers get into the property market with as little as a 2% deposit, while the government contributes up to 30% for existing property and 40% for a brand new property.
Using a guarantor loan, you might enter the market with minimal or no deposit.
Low deposit loans with Lenders Mortgage Insurance (LMI) allow purchases with 5-10% deposits.
Some state-based initiatives provide additional support for deposit-challenged buyers.
The ideal deposit size depends on your financial situation, property goals, and eligibility for various schemes.
How long does the entire home buying process typically take?
The timeline varies significantly based on individual circumstances, but a typical first home purchase might follow this approximate timeline:
Pre-approval process: 3 days to 1 weeks.
Property search: 1-3 months.
Contract negotiation and exchange: 1-2 weeks.
Settlement period: 30-90 days (typically 42 days).
From serious property hunting to receiving your keys, the process often takes 3 months, though this can vary based on market conditions and individual circumstances.
Can I use multiple government schemes and grants simultaneously?
In many cases, yes. For example, you might be eligible to combine:
The First Home Owner Grant.
Stamp duty concessions or exemptions.
The Home Guarantee Scheme.
Shared Equity Scheme.
First Home Super Saver Scheme benefits.
However, each scheme has specific eligibility criteria, and some combinations may not be possible depending on your circumstances and state-specific rules. Buyvest can help you identify which combinations are available to you.
What costs should I budget for beyond the property price?
Beyond the purchase price, budget for:
Stamp duty (though concessions may apply).
Legal and conveyancing fees ($1200-$2,500).
Building and pest inspections ($300-$800).
Mortgage registration and transfer fees.
Loan application or establishment fees.
Moving costs.
Initial repairs or renovations.
Furniture and appliances.
These costs typically add 2-5% to your property purchase price, though first home buyer concessions can significantly reduce this amount.
How does preapproval differ from formal approval?
Preapproval is a preliminary assessment indicating how much a lender is willing to lend you based on the information provided. It's subject to conditions and typically valid for 3 months. Formal (unconditional) approval comes after you've found a property and the lender has verified all information, including a satisfactory property valuation. Only formal approval represents a binding commitment from the lender.
What happens if the property valuation comes in lower than my offer?
If the valuation is lower than your offer price, you have several options:
Negotiate with the seller for a lower price.
Provide additional funds to cover the gap.
Request a review of the valuation if you believe it's inaccurate.
Seek an alternative lender who might value the property differently.
Consider whether to proceed with the purchase given the valuation.
A lower valuation can affect your loan to value ratio and potentially require additional deposit funds or Lenders Mortgage Insurance.
How do I know if I should use a guarantor loan?
Consider a guarantor loan if:
You have limited savings but strong income to service a loan.
You have family members willing and financially able to provide a guarantee.
You want to avoid Lenders Mortgage Insurance (LMI).
You're looking to enter the market sooner rather than waiting to save a larger deposit.
You understand the responsibilities and risks for both you and your guarantor.
Both you and your potential guarantor should seek independent financial and legal advice before proceeding with this arrangement.
What's the difference between fixed and variable interest rates?
Fixed interest rates:
Remain unchanged for a set period (typically 1-5 years).
Provide certainty for budgeting and protection against rate increases.
May have less flexibility and higher break costs.
Often have fewer features like offset accounts.
Variable interest rates:
Fluctuate with market conditions.
May decrease if official interest rates fall.
Typically offer more flexibility with features like offset accounts and additional repayments.
Have no break costs if you decide to refinance.
Many first home buyers opt for a split loan, combining both fixed and variable components to balance certainty with flexibility.
How can I improve my chances of loan approval?
To strengthen your loan application:
Maintain a clean credit history and check your credit score.
Demonstrate consistent income and employment stability.
Reduce existing debts and credit card limits.
Save consistently to show good financial management.
Prepare all documentation thoroughly and accurately.
Consider using a mortgage broker, like Buyvest, to find the most suitable lender.
Be realistic about your borrowing capacity and property budget.
Why you should choose Buyvest!
At Buyvest, we believe that informed buyers make confident homeowners. That's why we're committed to providing you personalised advice and support throughout your home-buying journey. Connect with Buyvest, and take the first step towards turning your dream home into a reality. Together, we will explore the best financial strategies for your unique situation, ensuring that when you're ready to make an offer on your dream property, you do so with the confidence and knowledge that you're making the best decision for your future.
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Your first home journey starts with confidence and ends with the keys in your hand
Every step is simple, clear, and tailored to your goals.
Important stuff:
Please note that the views and opinions expressed in this post are general information only, and this is not financial advice.
Any advice and information is provided by Buyvest Pty Ltd ABN 91 684 841 496, Australia Credit Licence No. 567392 and is general in nature, for educational purposes only and is not intended to constitute specialist or personal advice. This website has been prepared without considering your objectives, financial situation or needs. Therefore, consider the appropriateness of the advice for your situation and needs before taking any action. It should not be relied upon to enter into any legal or financial commitments. Specific investment advice should be obtained from a suitably qualified professional before adopting any investment strategy. If any financial product has been mentioned, you should obtain and read a copy of the relevant Product Disclosure Statement and consider the information contained within that Statement concerning your circumstances before deciding whether to acquire the product. You can obtain a copy of the PDS by emailing hello@buyvest.com.au. If you want to change your financial circumstances, such as applying for a loan, all loan applications are subject to credit approval.
All information on this website is subject to change without notice.
