Thinking of taking the plunge and breaking into the real estate market? Congratulations! That’s a major milestone, and it can feel overwhelming, especially if you’ve spent years saving up for your deposit. As a first-time homebuyer, you might want to look into getting a mortgage to finance your property. While you don’t need a broker to do that, they can help you to navigate the process from start to finish and find the best loan for your budget.
Here are 5 reasons why it’s worth getting a home loan for a first-time buyer, according to the experts at Savvy.
#1 It’s the perfect time to invest
With home loan interest rates at historic lows, it’s a buyer’s market right now. Real estate is one of the safest investments in terms of potential risks versus returns, and it’s relatively easy to secure the money you need to pull the trigger on your dream property. Plus, the property growth rate in Australia is on the rise. So, if you buy in a desirable location, you can expect the value of your investment property to increase over time.
There are so many other benefits of investing in property. These are the major ones:
- Earn fixed returns. Property investments are fairly steady, and aren’t subject to the ups and downs of the market in the same way as stocks and bonds. For that reason, they’re ideal for people with lower risk tolerance, and those who don’t want to be affected by market volatility.
- Boost your returns through rent payments. If you decide to rent out your investment property, you can use that money to pay off your mortgage. As a first-time investor, you could also get tenants to help you pay down a chunk of the mortgage until you’re ready to move into the place yourself. For even higher returns, you can consider investing in Special Disability Accommodation (SDA) through the government’s National Disability Insurance Scheme (NDIS).
- Tap into tax benefits. When you invest in property, you can access a range of tax breaks. For example, if your investment income is lower than the interest you’re paying, you can claim a tax deduction for the value of your property. You may also be able to apply for a PAYG Tax Withholding Variation through the ATO, which will reduce the amount of tax that’s withheld from your salary.
Most first home loan terms are 25 to 30 years, which means you can cover your mortgage payments and other maintenance expenses while you’re still in the workforce and earning a steady income.
#2 You can get into the market with a 10% deposit
You’ve probably heard you need to put down a 20% deposit to secure a property. While some lenders will ask you to cough up at least 20% of your property’s purchase price, many are much more generous.
In today’s competitive market, it’s possible to get a home loan of up to 90% or 95% of the property’s value. In other words, you could become a first-time homebuyer with a deposit of just 10% — or even 5%!
If you accept a first homebuyer home loan with a low deposit, you might have to purchase Lenders Mortgage Insurance (LMI). This protects the lender’s bottom line, and it’s standard practice for any loans with deposits of less than 20%.
#3 You can take advantage of the First Home Owners Grant
As a first-time homebuyer, Australia is a great place to live and buy property. That’s all thanks to a state government initiative called the First Home Owner Grant (FHOG). If you qualify for first-time homebuyer benefits, you can get financial help to buy your first home and save thousands of dollars in duties and fees in the process.
The eligibility criteria for the one-off grant varies between states. For example, in NSW, you’ll qualify if you’re an Australian citizen or permanent resident 18 or older who hasn’t owned or co-owned property before. You must be buying or building a brand new home that’s worth $750,000 or less, and be willing to move into the property within 12 months and live there for at least 6 months.
If you tick all those boxes, you’ll get $10,000 to put towards the purchase price. Not bad, right?
Some states offer additional incentives to first-time homebuyers, such as stamp duty concessions. A broker can walk you through your options, and your state revenue office should be able to answer any lingering questions you have.
#4 There are many types of loans on offer
There are plenty of loans that can make your first home more affordable. The best mortgage rates, fees and features can vary significantly from one lender to the next, as can credit scores for home loans. That’s why it’s important to shop around to make sure you’re getting the best possible deal.
For example, some loans might advertise low interest rates, but have a hefty list of fees in the fine print. So, while they look cheap, they could end up costing you a lot more in the long run. Other loans might allow you to make extra repayments so you can pay off your mortgage earlier, and some may let you redraw those funds if you need the money for something else.
#5 Brokers are here to help you!
Buying a home can be complicated, but you don’t need to do everything by yourself. An experienced broker like Savvy can help you cut through the clutter to find loans that suit your needs and budget, then narrow down your options. They can also help you build the perfect home loan application, and provide invaluable advice and guidance along the way.
The best bit? You won’t pay a thing! Brokers work on commission, so they get paid by lenders. And don’t worry — the industry is regulated, which means brokers can’t give certain lenders preferential treatment. They have to lay out all the options that are in your best interest, and let you decide for yourself.