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Getting started in the market
Starting out, starting over,
start with HomeStart
For many recent graduates, 2011 looks set to be an exciting time.
You’ve got the degree, you’ve started your working career – now it’s time to finally move out of your parents’ place or that crowded share-house.
But while home ownership offers great financial and lifestyle benefits once you’re in the market, the question is – how do you get started?
With this in mind, I'll focus on home loan options for young aspiring home buyers, and why it could be possible for you to achieve this financial goal sooner than you think.
Low deposit loans
A low deposit loan can help minimise the obstacle of saving up for a large deposit. HomeStart’s
Graduate and
Low Deposit Loans have deposit requirements starting from as low as 3%, plus fees and charges.
Avoid LMI
Lender’s Mortgage Insurance (LMI) can be a big added expense. LMI is insurance that a financial institution may require you to take out if you are borrowing more than 80% of the property purchase price.
This insurance protects the lender if you default or fail to pay the loan. Some financial institutions don’t have LMI, or may offer an alternative. HomeStart has a ‘Loan Provision Charge’ instead of LMI, which is a significantly lower cost for most borrowers.
Use your rental history
Many mainstream lenders require you to provide evidence that you can save by holding a certain amount in your bank account. This can be a challenge for would-be first home buyers who may have only just started on the road to saving.
However, some financial institutions can accept a good rental history as proof that you have the capacity to make regular loan repayments.
Take advantage of grants
Fees and charges like stamp duty and loan set-up costs are other expenses to watch out for. To help with these, the Federal and State Government provide First Home Owner Grants, see www.revenuesa.sa.gov.au for more information.
Think twice about guarantor arrangements
Finally, if you’re thinking about asking your parents to be guarantor for a home loan, remember that if you default on your loan, you could be putting the family home at risk. In my view, it’s much better to explore the options which will help you get started sooner – on your own two feet.
