If you’re looking at buying your first home, you probably have heaps of questions about how to work out the best way to find and finance your new place.
If in doubt consult with expert mortgage brokers who specialise in helping first home buyers navigate the home loan minefield. They will ensure you have all the knowledge and support you need throughout the loan application and home buying processes.
In the meantime, we’re going to go through and debunk five common first home buyer myths you may encounter when purchasing your first home.
Myth #1: You shouldn’t put less than 20 per cent deposit down.
While it is true that the bigger your deposit, the less you’ll need to borrow (which also means you will have lower repayments and possibly better interest rates), it is also true that you don’t need 20 per cent deposit. The benefit of putting down a 20 deposit is that you will avoid lenders mortgage insurance (unless you’re a doctor, accountant or engineer in which case LMI is waived). Yet putting down this much deposit isn’t always possible for everyone.
With lots of our home buyers, we find you can put as little as five to eight per cent of the purchase price down, allowing you to get started in the property market and build equity sooner. In fact, 81 per cent of our buyers put down less than 20 per cent deposit on their first home purchase. Most broker’s offer low deposit options starting from as little as five per cent (or guarantor loans where you don’t need any deposit at all).
Myth #2: You can’t get a home loan if you have a HELP debt.
Are you finding it hard to save up for a deposit because you’ve been concentrating on paying off a HELP (or HECS) debt? Fear not, you can still buy a home even with a HELP debt. Yet the other thing to keep in mind is how the banks will look at your HELP loan.
They won’t necessarily look at how much the total loan is, but how much you’re required to pay from each pay cheque. The banks use the ATO’s repayment thresholds to calculate your repayment rate, which is determined by your current income. So if you earn $55,000 and owe HELP, the bank will factor in $55,000 at 4 per cent equalling $2,200 per year in repayments which will slightly lower your borrowing capacity, but it won’t rule you out altogether! You can see more examples for different income brackets below.