Buying your first home is a new experience and with that comes questions, because we are dealing with a lot of money! We have compiled a list of FAQ’s to help provide more information for you!
How much deposit do I need to have saved?
It is ideal to have 20% of the purchase price saved as a deposit to ensure you don’t have to pay Lenders Mortgage Insurance (LMI), which can be quite expensive. However, using the schemes available to you as a First Home Buyer, you can have 5% of the purchase price saved as genuine savings and you don’t have to pay LMI! The banks require 3 months of genuine savings to show the deposit has been built up over time, and you have not received a lump sum of money to help fund the purchase. The more you have saved the better, as you don’t have to borrow as much money from the bank!
What is LVR and LMI?
LVR is the Loan to Valuation Ratio, which is the loan amount divided by the value of the property. The lower the LVR, the better, as a higher LVR means you are borrowing more of the property’s value and the bank charges higher interest rates for a higher LVR. If your LVR exceeds 80% you are required to pay LMI.
LMI is Lenders Mortgage Insurance, which means when you borrow over 80% of the property’s purchase price or valuation, the bank charges a one-off insurance fee to ensure they can cover any potential losses. The higher the LVR is, the more LMI you have to pay to the bank on top of your loan!
What schemes may be available to me?
As a First Home Buyer, there are two main schemes available to you, but they are for different loan types.
The First Home Guarantee Scheme (FHG) is a federal government scheme, where they act as guarantors for your loan to ensure you don’t have to pay LMI whilst not actually owning a portion of your house. There is a limit on the positions available, however, they introduced a regional buyer’s First Home Guarantee Scheme which means there are plenty of scheme positions available! With this scheme, there are restrictions on the maximum purchase price, but this does vary for every state, so get in contact with us to learn more!
The other scheme is the First Home Owners Grant (FHOG) which can be used for the purchase of a new house or the construction of a new house, and the federal government will give you a $10,000 grant. There are terms & conditions with this, but if you would like to know more, please give us a call!
How long do I have to be in my job so I can get a loan?
As a part-time or full-time employee, you have to have been in your job for a few weeks so we can get 2-3 payslips as income evidence for the bank. However, casual employees are treated differently as the bank requires you to be in your casual job for a minimum of 6 months.