Purchasing your own home is still part of the great Australian dream. It’s more than just a status symbol, owning your own property means you have financial freedom, which gives you access to an array of possibilities.
But, the average house price is anything from $500,000 to a million. If you’re looking for a 20% deposit to get a traditional mortgage then it’s going to take you a long time to save it up. For many, it can seem impossible to get onto the property ladder. But, there is a way.
Start With The House
The first step is actually to sort out your finance and find out how much you can borrow. This determines the amount you can spend on your first property. You’ll then want to find the best possible property for that money.
You should note, this is a great opportunity to visit your local auctioneer and check out what properties they have available. You can often find one for significantly less than through a traditional real estate agent.
However, you should proceed with a little caution as there may be a lot of work involved to make the house livable.
Apply For A Government First-Time Buyer Loan
The government are currently offering people help to get a property. Strictly speaking, you’ll need to find a 5% deposit in order to qualify. You’ll need to be an Australian citizen, over 18, and earning at least $125,000 as an individual. You also can’t have owned a property before.
The government will then back your loan request without the need for lenders mortgage insurance.
This approach can work very well with the 105% mortgage
The 105% Mortgage
As the name suggests, this is a mortgage that allows you to borrow up to 105% of the value of a property. This is truly a property with zero down. The 105% covers the cost of the house and all the legal fees to complete the purchase.
However, to qualify for this loan you’ll need to have someone with plenty of faith in you. The loan application must be backed by a parent or other family member. In effect, the family member agrees to pay the mortgage if you don’t.
You’ll need a supportive parent or family member and plenty of trust to make this approach work.
Another approach is for your parents to gift you the money for the deposit. This can be done without the need to pay tax and they can do it by official letter, ensuring the funds are only used for a house purchase.
The deposit they put down for you means you can apply for a traditional mortgage and own a property without having to pay anything upfront.
Of course, for any of these approaches to be successful you’ll need to have a good credit score. That generally means one above 700. You can improve it by clearing all debts and minimizing expenditure in the months leading up to your mortgage application.