With low interest rates and a buoyant market, property is on many people’s agenda. Owning a house is the great Australian dream. But first and foremost, there is the question of a deposit.

Here is a quick guide to deposits and where first-time buyers can find help.

How much deposit do you need before approaching a lender?

This depends on a number of factors, such as value of the property you want to buy and your borrowing capacity.

Banks and financial institutions in Australia usually require a deposit of 20 per cent of the value of the home.

While some lenders may accept a smaller deposit, they may attach other terms and conditions to the loan. For instance, to protect the lender against any loss if you are unable to pay the loan, you to take out Lender Mortgage Insurance.

This is a one-off, non-refundable, non-transferrable premium that’s added to your home loan. It’s calculated based on the size of your deposit and how much you borrow. Generally, the more you contribute to the purchase price of your property, the lower the cost will be.

As well as saving, where else can I get help with a deposit?

Saving for a 20% deposit may seem daunting for first time buyers, but there may be other options.

• Help from family/friends

Many parents are helping their first home buyer children by assisting with the deposit. If this is the case, you will need to clearly stipulate whether the deposit amount is a gift or a guarantee – there are major legal differences between the two, including liabilities for parents.

Whether the deposit is from friends or relatives, you should always seek legal advice to ensure you both understand the legalities and responsibilities of the transaction.

• First Home Owner’s Grant (New Homes) 

If you are buying or building your first home, you may be eligible for a $10,000 grant under the First Home Owner Grant (New Homes) scheme. The scheme is managed by Revenue NSW.

You can apply for the scheme when you arrange finance to buy your home. The bank or financial institution providing you with a loan will need to be an approved agent. More details can be found here.

• First home super saver scheme

The first home super saver (FHSS) scheme was introduced by the Australian Government in the Federal Budget 2017–18 to reduce pressure on housing affordability.

The FHSS scheme allows you to save money for your first home inside your super fund. This will help first home buyers save faster with the concessional tax treatment of superannuation. More details can be found here.

Other financial schemes to help first home buyers

Along with saving and putting together your own money, there are now a number of government schemes aimed to get first home buyers into the property market.

• First Home Loan Deposit Scheme

Through the National Housing Finance and Investment Corporation (NHFIC), this scheme is an Australian Government initiative to support eligible first home buyers purchase their first home sooner.

10,000 First Home Loan Deposit Scheme places will be available to eligible first home buyers from 1 July 2021 to 30 June 2022.

Under this Scheme, part of an eligible first home buyer’s home loan from a Participating Lender will be guaranteed by NHFIC. This is aimed at enabling first home buyers to purchase their first home sooner with as little as a 5% deposit. More details about this scheme can be found here.

• The Family Home Guarantee

The Family Home Guarantee aims to support eligible single parents with at least one dependent child in purchasing a family home, regardless of whether that single parent is a first home buyer or a previous home owner.

10,000 Family Home Guarantees will be made available over four financial years from 1 July 2021 to 30 June 2025.

Under this Scheme, part of an eligible home buyer’s home loan from a Participating Lender will be guaranteed by NHFIC. This is aimed at enabling you to purchase your first home sooner with as little as a 2% deposit.

Any guarantee of your home loan is for up to a maximum amount of 18% of the value of your property (as assessed by your lender). This guarantee is not a cash payment or a deposit for your home loan. More details about this scheme can be found here.

• The New Home Guarantee

The New Home Guarantee is an Australian Government initiative to support eligible first home buyers purchase their first home sooner.

The New Home Guarantee has been extended with additional 10,000 places available from 1 July 2021 to 30 June 2022.

Usually, first home buyers with less than a 20% deposit need to pay lenders mortgage insurance.

Under this Scheme, part of an eligible first home buyer’s home loan from a Participating Lender will be guaranteed by NHFIC. This is aimed at enabling you to purchase your first home sooner with as little as a 5% deposit.

Any guarantee of your home loan is for up to a maximum amount of 15% of the value of your property (as assessed by your lender). This guarantee is not a cash payment or a deposit for your home loan.

More details about this scheme can be found here.

As well as a deposit, what else will a lender look at when assessing me for a loan?

Buying a house isn’t just about the deposit, lenders do look at other criteria when assessing you for a home loan. This includes a clean credit history, minimal debts and a pattern of stable employment or income. A lender will also factor in living costs to ensure you have enough disposable income to afford to pay the mortgage.

Other buying costs

Remember too there are other costs to factor in when purchasing a property. This includes conveyancing, searches, a building report and stamp duty fees.

As a first home buyer in NSW, you may be eligible for a full or partial exemption on transfer duty (previously known as stamp duty) under the First Home Buyers Assistance Scheme.

You can use the residential property buyer tool to find out the taxes and duties you may need to pay, as well as exemptions and grants that you are entitled to receive.

Seek professional advice

When it comes to finances, we always recommend seeking independent professional advice from a specialist such as a mortgage broker or financial advisor. They will advise you on what you need to do, what to consider and what help is available for your particular financial circumstances.

If you want to know more about buying and selling houses, and what you need to consider, get in touch with us!

We are a local, independent family run business with decades of experience behind us. Our aim is to make your property sale as easy, and stress-free as possible; we are frequently told we go above and beyond expectations, and we are constantly achieving brilliant results for our clients.

Contact us now for a free, confidential, no obligation quote. Give us a call on 02 4954 8833, send us an email to: mail@apnewcastle.com.au or call in at the office where we can really talk you through the process and tell you what you need to consider.

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