First Home Buyers/ No Deposit

First Home Buyers/ No Deposit

First Home Buyers Loan* & First Home Purchase

When buying your first home there is quite a lot of information that you will need to gather, research and understand. there will be many questions that need answering, like:-

Do I qualify for a First Home Buyers Loan and how much can I borrow?

How much Deposit or Savings will I need with my First Home Buyers Loan?

What do lenders mean when they talk about Genuine Savings?

No Deposit First Home Buyers Loan? Which is the Best First Home Buyers Loan for me?

What is the First Home Owners Grant (FHOG) and do I qualify for the Grant?

Will I have to pay State Govt. Stamp Duty and if so, how much?

Why do I have to pay for the Lender’s Mortgage Insurance?

Some First Home Buyers Loans have Mortgage Risk Fee and Title Insurance? What are they?

Can I buy at Auction with a First Home Buyers Loan?

Do I need Building & Pest Inspection Reports? How do I arrange these?

What is a Strata Management Report? Who is the Body Corporate?

Are there any hidden costs that I should know about?

How do I secure a property when I don’t have a 10% deposit?

Should I use a Solicitor or Conveyancer?

Getting knowledgeable answers to all your questions and gathering all the correct information about the first home buying process and first home buyers loans is vitally important if you would like your first home purchase to be a stress free and enjoyable experience.

At Community BEST Home Loans we understand this and our Homeloans Consultants are thoroughly trained and knowledgeable in the First Home Buyers Process. they understand the information that you need to know and more importantly they understand the information that you MUST know. they will act as your First Home Buyer Personal Assistant and from first meeting they will be there to answer all your questions and guide you through the complete first home buyer process;

  • General Research & Understanding
  • FHOG & Stamp Duty Concessions
  • First Home Buyers Loan Selection & Pre-Approval
  • Solicitor or Conveyancer Selection
  • Property Search & Selection
  • Deposit & Exchange – Contract of Sale
  • Preparing to Move In
  • First Home Buyers Loan Settlement and Property Purchase

First Home Buyers Loan – How much can I borrow?

Finding out how much you can borrow and understanding the lender requirements associated with a First Home Buyers Loan is generally the first step in the First Home Buyer Process.

The amount that you can borrow is based on lender specific calculations commonly known as ‘Affordability & Serviceability Calculations’.

In general terms:

‘Serviceability‘ takes into consideration your Incomes, Taxation and Liabilities that will exist after the purchase, a Loan Assessment Interest Rate and the Loan Term. As a guide, your total annual debt repayments i.e. mortgage, car loan, credit card etc should not represent any more than approx. 40% of the borrower(s) Annual Gross Income(s);
‘Affordability‘ takes into consideration the Purchase Price, Purchase Costs, your Cash Contribution (Deposit) towards the purchase, FHOG and whether your Deposit is Borrowed, Genuine or Non-Genuine Savings.
To find out how much you can borrow and how much your repayments will be, go to Mortgage Payment Calculator.

First Home Buyers Loan – What is the maximum lend?

The majority of lenders will allow a maximum lend equal to 95% of the property value or purchase price whichever is the lesser (the loan percentage is commonly known as the LVR – loan to value ratio i.e. 95% of the purchase price or value is 95% LVR). this being the case, a first home buyer would be required to have savings or a deposit equivalent to 5% of the purchase price plus loan and purchase costs.

There are a number of lenders who will consider a maximum lend greater than 95% LVR. the maximum lend is referred to as ‘95% LVR plus Cap LMI’. Cap LMI is short for Capitalised Lenders Mortgage Insurance meaning that the lender will lend you up to a maximum of 95% LVR plus the cost of the Lender’s Mortgage Insurance Premium. If the purchase price /value of the property you are buying is $400,000 and the Lender’s Mortgage Insurance (LMI) Premium is $10150 then the maximum lend will be $390150 (97.54% LVR)

For an indication of Mortgage Insurance Premiums, go to Homeloans Mortgage Insurance Estimates

Deposit: Genuine or Non-Genuine Savings, Borrowed, Gift or Pledge?

Generally speaking, when you wish to borrow more than 85% (LVR) most of the traditional lenders require you to have a minimum 5% deposit which is made up of what is known as Genuine Savings. the balance of funds required to complete the purchase can consist of what is known as Non-Genuine savings. If the Purchase Price is $400000 and Total Costs associated with the purchase are $13150 and the loan is $390150 (95% LVR + Cap LMI) then you would be required to have Genuine Savings of $20000 and Non-Genuine Savings of $3000.

Depending on the cost of the Mortgage Insurance Premium the maximum First Home Buyer Loan available is 95% to 100% LVR.

Note:

Homeloans that are available for first home buyers who are not able to show Genuine Savings are usually classified by lenders as Higher Risk and therefore a slightly higher interest rate and/or costs are charged.

As a guide, the lenders’ requirements for First Home Buyer Savings /Deposits are;

For loans between 95% – 100% LVR

The borrowers’ contribution towards the purchase is to include a minimum personal contribution of 5% Genuine Savings. Genuine Savings are savings that have been held or accumulated over a period of at least 3 – 6 months.

Some lenders may allow the First Home Owners Grant (FHOG) to be used as Genuine Savings.
For loans between 90% – 95% LVR

The borrowers’ contribution towards the purchase can consist entirely of non-genuine savings such as FHOG, non-repayable gift, proceeds from sale or savings held less than 3 months provided it does not consist of any borrowed funds.

For loans up to 90% LVR

The borrowers’ contribution towards purchase can consist completely of unsecured borrowings such as a personal loan or repayable gift.

Supplementary Costs

When purchasing your first home, it is also important to understand the impact that other costs associated with the purchase of your home, may have on the amount of savings /deposit you require.

Other costs to be considered are Solicitor /Conveyancer Fee, Purchasers’ share of Council & Water Rates, Building & Pest Inspections, Government Fees, House & Contents Insurance to name a few.

Limited Deposit/Savings Available?

If you have a limited amount of savings and when combined with a 95% LVR + Cap LMI Loan and/or FHOG you have insufficient funds to purchase a property but you have a good credit history and stable employment, then you may qualify for ‘no deposit home loan’ or ‘guarantor/family pledge home loan’?

No Deposit Guarantor Family Pledge Home Loan (GFP)

This type of homeloan allows you to borrow up to 110% of the purchase price or value of a property (110% LVR) and avoid the costly expense of Lenders Mortgage Insurance or a Mortgage Risk Fee which could mean a saving of thousands of dollars.

All you need is a sponsor (family or relative) to provide a limited guarantee secured by the equity in their residential property for the amount you need to borrow in excess of 80% of the value of your property.

As a rule of thumb, lenders will allow you to borrow up to 110% LVR based on 100% being used towards the purchase of the property, 5% being used towards costs associated with the purchase and 5% being available for any debt consolidation.

A Guarantor Family Pledge Homeloan can also be used for Vacant Land & Construction.

How does it work?

Let’s look at some examples of how you may use a GFP Loan.

Joseph and Rosie are a couple in their early 20’s who wish to purchase a $400,000 home on the outskirts of Sydney. they have managed their money very well over the past 18 months, having paid out their car loan of $12000 and saving an extra $2,000 towards the purchase of a home. they are First Home Buyers who qualify for the FHOG and Stamp Duty exemptions. their concern is that property values in the area where they wish to purchase are on the increase and may increase dramatically by the time they have accumulated sufficient savings/deposit.

Purchase Price

$400,000

Mortgage Insurance

$10,150

Purchase & Relocation Costs

$3,850

 

$414,000

95%LVR + Cap LMI Home Loan

$390,150

FHOG

$7,000

Savings

$2,000

 

$399,150

Savings still required

$14,850

Now let’s look at how their situation changes with a Guarantor/Family Pledge Loan:

Purchase Price

$400,000

Mortgage Insurance

Nil

Purchase & Relocation Costs

$3,850

 

$403,380

80% LVR Home Loan

$320,000

20% LVR GFP Loan

$80,000

FHOG

$7,000

Savings

$2,000

 

$409,000

Savings still required

$14,850

Joseph & Rosie have $5,150 that they can use towards furnishings, landscaping etc or keep it as savings for a rainy day.

Plus they have saved $10,150 in mortgage insurance premium!

Blair and Alysha are also in their early 20’s and wish to purchase their first home. They have spotted a $400,000 home on the outskirts of Brisbane which appeals to them as a good purchase because they believe that with a little bit of tender loving care, some elbow grease and about $15000 to spend on the home they could increase the value of the property by approx. $35,000. They also feel that Brisbane property prices, although flat at the moment, are going to increase soon so they wish to get into the market sooner than later to take advantage of the current prices and any upswing in value later. Even though they are First Home Buyers who qualify for the FHOG and Stamp Duty exemptions, their concern is they may miss out on this window of opportunity, as they only have $2000 in savings due to the cost of their recent wedding and still have $10,000 owing on their car which is worth $8,000.

Now let’s look at what they may be able to achieve with a Guarantor/Family Pledge Loan:

Purchase Price

$400,000

Mortgage Insurance

Nil

Purchase & Relocation Costs

$3,850

 

$412,350

80% LVR Home Loan

$320,000

20% LVR GFP Loan

$100,000

FHOG

$7,000

Savings

$2,000

 

$429,000

Savings still required

$16,650

Blair & Alysha are able to seize a good purchase opportunity, consolidate all their debts into one loan and retain $16,650 in available funds which they can use towards refurbishments (tender loving care) of their home.
Result….

Saving on Mortgage Insurance Premium

$10,150

Interest saving from early payout of car loan

$1,500

Increased Value of Property after refurbishments

$35,000

Before the purchase they had a neutral asset/liability position (Assets of $10000 – Car & Savings, Liabilities of $10000 – Car Loan).

After the purchase and refurbishments, they have a surplus asset position of $24650 (Assets $444650, Liabilities $420000). The most important point to note is that the value of the home $435000 is greater than the loan amount $420,000!

As you can see, with a Guarantor Family Pledge Homeloan you can buy your home sooner with NO DEPOSIT, SAVE THOUSANDS in mortgage insurance premiums and AVOID THOSE HIGHER INTEREST RATES associated with some high LVR First Home Buyer Loans.

To explore all the First Home Buyer Homeloan options and work out which homeloan options are best for you, get connected with a Community Best Homeloan Consultant by phoning 1300 448 911 or email us your contact details and one of our Consultants will contact you.

* Loans subject to application and approval. Terms, conditions and eligibility criteria apply. Fees and charges may be payable.