In this article:
First Home Buyer Scheme:
At the beginning of this year, the government introduced the first home buyer scheme. Under this scheme, a first home buyer can procure a property with a deposit as low as 5%. For mortgages with a deposit of less than 20% of the property cost lenders opt for LMI (Lender Mortgage Insurance) to protect themselves from defaults. The cost of LMI is passed to the borrower leading to an increase in the mortgage repayment. In the First home buyer scheme, the federal government bears the cost of the LMI allowing first home buyers the chance to get on to the property ladder with a lower deposit amount at the approximate cost of a regular mortgage.
First Homebuyer caution:
Lender risk aversion:
In addition to fewer buyers, a lot of sellers may be looking at a sale for financial respite. Interacting with such motivated sellers could put you in an extremely favourable negotiating position.
If you are all set to make the best of current circumstances and are all set to buy your first home, there are few things you should consider
- Be prepared for increased lender scrutiny. With the tightening of norms, lenders are looking at income stability and living expenses very closely. Be mindful of your credit card and online spending during COVID. This could negatively impact your chances of securing a mortgage.
- Apply for pre-approval: Don’t let your dream deal slip away on account of delayed mortgage approval. Lenders are taking longer than usual to approve a mortgage in the wake of current circumstances. To expedite your overall purchase process and improve your negotiation capabilities it’s best to opt for a pre-approval that is valid for 3 -6 months
- Choose a mortgage solution that matches your specific circumstances: Would you need an offset account? Is your mortgage rate the most competitive? Should you keep a part of your loan fixed and the rest variable?
Navigating the complexities of the mortgage industry as a first home buyer can get overwhelming. Rely on us to scope the market and identify the best fit to achieve your property ownership aspirations.