Hope for First Home Buyers
The Reserve Bank has again kept the cash rate steady for another month, citing stability in the market.
The Spring-selling season is well under way with promising results to date. And with spirited selling activity, the topic of first homebuyers not being able to get into the real estate market due to escalating property prices has been a popular one these past 12-18 months.
Many first time buyers start by having a discussion about buying a home, then conduct a quick internet search on the localities they know, followed by a review of their savings and how much they have saved to date. A sense of disillusionment commonly results, with resentment aimed at society in general and current market conditions for making it so hard to buy their first home!
With the average house price in Melbourne being around $600,000 (depending on where you look), it can be a real challenge saving the absolute minimum 5% deposit AND sufficient funds for stamp duty etc.
One popular solution is to seek additional security offered by parents/family members or close friends so that borrowers can leverage the shortfall and get into their first home today, not next century!
An example of how this works:
- The property you (as first homebuyer) wish to buy is $600,000
- We arrange for a first mortgage on that property of just $480,000. This is under the threshold of mortgage insurance trigger (80%) so acceptable to most popular lenders.
- The balance of $120,000 is borrowed against your family or friend’s property. The family or friends are not borrowers, they are simply providing security guarantee for your loan.
- The lender registers a second mortgage on the family/friend’s property (to protect their interest)
- The stamp duty and other applicable fees/charges are covered by your savings.
- If the property is sold in the future, then the bank controls the proceeds to clear both loans and properties.
With this, the first timers can enter the market sooner rather than later in a manner that protects all parties and maintains the onus of accountability to service the loan where it should lie - with the borrower.
Please feel free to call me on 0438 041 111 to discuss your next home loan or for your confidential home loan health check - it’s free and could save you thousands on what you are currently paying.
As always, enjoy life, work hard, play safe and remember that we are always here to help you
‘Take The Confusion Out Of Lending’
Peter Vinci - 0438 041 111