First Home Buyers Options
Understanding the issues that first home buyers have in getting into the Brisbane property market is something we take seriously. The impact rising property prices have had on the decision making process has been huge. 17% of prospective FHB’s said they may have to give up buying property. 40% said that they will end up buying something smaller that they wanted and 40% said they would end up buying in another location. With 23% saying that they would consider a large loan to get what they want. (Source QBE Australia Barometer 2015. Note numbers do not add up to 100).
So how do you get in?
In looking at our clients recent – some save it up. Some get a gift or loan from parents. Some have a family guarantee set-up. Some get personal loans, or from inheritance.
When you buy your first home – it is important to have a little other debt as possible. As you normally are spending any discretional income on making your home your own. We do not like clients borrowing to make up a deposit – unless they have a very large income and surplus monthly income to be able to manage all repayments including a buffer in case of interest rate rises.
You normally need 5% genuine savings over 3 months to satisfy lenders that you can save and contribute towards a proposed home loan. As well as show that you can meet ongoing repayments from settlement date. So on $450,000 that is $22,500. Plus there are legals and costs associated with the purchase including Lenders Mortgage Insurance (LMI) which vary depending on lender and also if they allow the LMI to be added to the loan or not. There are lenders who will use what rent you pay (via a proper rental management firm on a proper lease) for past 12 months to verify your capacity to service the loan into the future.
To avoid any LMI cost and in most instances improve your interest rate – if you have family or parents kind enough to allow you to use the equity in their home or investment property this family guarantee type of set-up can work very well. There are lenders who look at these differently – we tend to recommend ones that just do security cover – meaning that you need to service the full loan amount on your own incomes alone. They would be liable at 20% of the property value against their own property. They do not have to have cash to put towards it. It is a proper legal and binding arrangement so all parties need to be very clear on their roles and what the impacts maybe on their future plans.
There are plenty of scenarios that work. But they need to be tailored for each client as everyone’s situation is different.
We are here to discuss and facilitate options for our clients to get what they want. A place to call their own.
Patrick Cranshaw, a Certified Mortgage Professional for over 21 years, founded North Brisbane Home Loans in 2002. His career began with ANZ Bank in New Zealand, where he progressed over 16 years to a Business Banking role in Virginia. After moving to Brisbane in 2000, Patrick led the QLD market for a home loan agency, helped set up the REMAX Real Estate Finance division, and practiced as a broker.
