So you’ve been saving for your first house. But property prices won’t quit rising, and your dream home is looking more and more like it’ll remain a dream.
House values are soaring by nearly $2,000 a week – and Aussies haven’t been able to save enough to keep up, locking thousands out of their local property market and sparking concerns about housing affordability.
“Many first home buyers who thought they had a 20 per cent deposit saved up are finding their deposit now falls short of this mark because the asking price for the homes they’re looking at is now significantly higher,” RateCity research director Sally Tindall told Yahoo Finance.
However, if you’re feeling discouraged, don’t lose hope just yet. According to the experts, there are some small things Aussies can do to get a foot on the property ladder.
“It might be time to tweak your original plans, or potentially change tack altogether,” Tindall said.
So even if you’ve been saving a while, here’s a quick checklist of things first home buyers can do to keep their dream property insight:
1. First things first: lock in a solid savings rate
Chances are you’re probably already doing this, but it’s worth mentioning anyway. It’s no secret that savings rates are at an all-time low at the moment, but particularly savvy Aussies can use certain strategies to lock in a good rate.
Analysis from Canstar reveals Virgin Money currently has the crown for the best savings rate at 1.5 per cent, beating ING’s 1.35 per cent.
But if you’re a young adult, you’re eligible for a higher rate: up until recently, Westpac held the famously market-leading rate of 3 per cent rate, available for 18-29-year-olds with savings below $30,000.
But they recently slashed this, making them tied with the Bank of Queensland’s Fast Track Starter account offering 2.5 per cent.
2. Familiarise yourself with schemes you might be eligible for
You might have already checked them out, but ensure you’re across all the schemes available to first home buyers.
“If you’re eligible for the First Home Loan Saver Scheme, consider saving your deposit that way,” said Finder home loans expert Sarah Megginson.
“It allows you to make extra super contributions and then withdraw them later to use towards your home deposit.
“You’ll not only save money on tax, but your money will be invested in shares and stocks via your super – so the returns will hopefully be much better than you’d get in a savings account.”
Here’s a quick list of schemes you should know about:
- First Home Super Saver Scheme
- First Home Loan Deposit Scheme
- Family Home Guarantee
- First Home Owner Grant
(And yes, they’re all different.)
You might also be eligible for stamp duty discounts in your state, which Megginson says could be worth tens of thousands of dollars. Property buyers’ agent Cohen Handler has a state-by-state guide to stamp duty here.
3. Find lenders who will waive your LMI
Home buyers will typically have to pay Lenders Mortgage Insurance (LMI) if their deposit is under 20 per cent.
But Aussies may not know that some lenders have a lower threshold.
“A handful of lenders will waive lenders mortgage insurance costs if you have a 15 per cent deposit, including St George, Bank of Melbourne, BankSA and neobank 86 400,” Tindall told Yahoo Finance.
Just make sure this is right for you, she added. “While this kind of deal can mean you don’t have to wait until you’ve saved a 20 per cent deposit, make sure the interest rate you’re paying is competitive.”
4. Get to know the local real estate agents
If you’re still on the lookout for the perfect home, find ways to get the perfect home to come to you, says Megginson.
“When you’re actively shopping for property, contact real estate agents in your desired areas and give them a detailed list of exactly what you’re looking for,” she said.
“They might have access to off-market deals and they’ll keep you informed as soon as properties that suit you come on the market.”
5. Get a guarantor
Both Megginson and Tindall recommended considering a guarantor on your loan, which can help you nab the property with a smaller deposit and without paying LMI.
But they both had a similar warning. “This decision shouldn’t be made lightly – by you or your guarantor,” said Tindall.
“A guarantor provides additional security on a mortgage if you can’t save the full 20 per cent deposit, but they are liable for repayments if you default – so it’s a big decision,” Megginson added.