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Latest research by Westpac reveals that four in five Australians who are potential home buyers prioritise staying within budget as an important consideration. Buyers are definitely giving up on luxuries when it comes to saving for their home!

In fact, with current home loan rates dipping low, the time may be just right to buy your first home and step inside the world of property owners, if you still haven’t. But while you scrunch and save, there are many myths floating around the market that may dissuade first time buyers. So let’s get busting top first home buyer myths:

First-home-buyer-myths

1. I need 20% deposit to buy a home

In an ideal world, having 20% of the purchase amount as home loan deposit can help you get better terms on your home loan. But considering the fact that an average Australian needs to save $1,121 a month for 10 years (22% of the average salary) to scour a measly 10% deposit for a median priced property in Sydney, the world is definitely not ideal.

However, the good news is you can still buy a property without 20% deposit. Most lenders will lend up to 90-95% of the property cost if you pay Lenders Mortgage Insurance or LMI. An added advantage is that LMI premium can be added to your loan amount and you needn’t pay upfront from your pocket.

Remember that LMI protects the lender against payment defaults, and not you!

Another option is to take a parent guarantee loan if you do not have an adequate deposit. Yes, these loans still exist.

2. Well, I only need to save for the home loan deposit

Of course, you need to save up for the home loan deposit but many first home buyers lose out on their dream home because they fail to take into consideration the accessory costs.

Stamp duty, conveyancing fee, building inspection, broker’s fee, lender’s fee and a whole lot of accessory costs come into play when you buy a home. In fact, these can add up to 5% of the total purchase price.

3. My first home cannot be an investment property

Why not? You can choose whether to buy an investment property or not as your first home. However, Gen Y is choosing to buy investment properties in affordable locations and continue renting in prime spots of their choice for a comfortable lifestyle.

An investment property gives you a foothold in the property market without curbing your flexibility, and also provides rental income that can be used to pay off the mortgage. There are tax benefits as well. Welcome to the generation of rentvesting.

4. I am a small business owner; I cannot get a home loan

Self-employed persons or freelancers may not be able to provide complete paperwork for traditional home loans but they have low-doc loans to turn to. Many lenders offer low-doc loans at competitive rates with minimal paperwork.

A 10% deposit, Business Activity Statements (BAS) duly lodged with the ATO, a valid ABN and a duly filled income declaration form are all you need to apply for a low-doc home loan.

5. I have an education loan, I will not get a home loan

First home buyers often hesitate to enter the market because they think they are not eligible for a home loan due to pre-existing debts. While it is true that pre-existing debts will affect your borrowing capacity (use our home loan calculator to know how much you can borrow), lenders take into account a holistic picture of your incomings, expenses, and debt, apart from how much you intend to borrow, before approving or rejecting your home loan application.

Do you know applicants with bad credit may also be eligible for a home loan?

6. The cheapest rate is the best rate

Interest rates on home loans are at an all time low and lenders are offering several home loan deals to retain existing customers as well as woo new ones. Online mortgage comparison can help you find the lowest home loan rates, however, cheapest may not always be the best.

Apart from a low interest rate, look for home loan options that are cut to your financial aims – Do you need an offset account? Would you like the option of free additional repayments and redraws? How many of the essential home loan features are you getting in your home loan?

Shop around before zeroing-in on any home loan. Having the features you need in a home loan can save you more in the long run. Our expert brokers can help you understand your financial situation better and suggest home loan deals that are tailored for you. Get in touch now for an instant resolution to queries online without any unwanted phone calls.

By Vidhu Bajaj

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HashChing is helping Australians by providing access to the pre-negotiated home loan deals. Obligation free consultation with one of our partner brokers might save you time, hassle and money.