We recently helped a young man, that we will call James for the sake of this story, to buy his first home. James was 24 years old and had managed to save $10,000 from his job of a few years, as a mould injector. He really liked the idea of buying a property near his parent’s home as a way to be fully independent, but also to be able to drop in for family meals on regular occasions. James had no idea if this would be possible given it would be his first home.
The area comprised of mainly houses and larger properties, however a unique opportunity presented itself, to buy a unit. The unit was nearly $300,000. While James had secure employment, he also had a car loan and a credit card. He had been earning a decent wage for a young person, but nothing excessive. He had no idea how to find out if he could buy anything, let alone this unit in his dream location.
Luckily, the real estate agent that James spoke to suggested he contact us at Living Home Loans. We took his phone call and quickly found out that James’ parents may be in a position to help out by offering a family guarantee. This would be the golden key because James didn’t have enough deposit to buy this property on his own.
Purchasing his first home became a reality!
Here at Living Home Loans, we were able to sort through all the calculations to find out if James could actually buy this property. We checked all of James’ facts and figures to ensure he would be suitable for a competitive lender. We saw that he would be able to borrow the amount of money he needed. However, he did not have enough deposit funds to proceed on his own.
Now that was not the end of the road. James had a supportive family with parents that wanted to help him to buy this unit. They owned most of their own home with over $500,000 in equity. This was the KEY for James to be able to buy his first home.
The family guarantee meant that James didn’t have to put any money in. His family’s home was used as security for a portion of his loan, which meant he didn’t have to pay Lenders Mortgage Insurance or a deposit.
James’ family was in the perfect position to be able to support him. And their Family Guarantee reduced any extra costs for James.
Unbelievable! First of all, it was a one off for the unit to become available for purchase, in the same suburb as his family home. Then, James’ family had the equity needed to support James in his purchase with just a small deposit. He put some of his own funds in, but in effect, could have kept his funds to do renovations to the property. We love keeping families together and this purchase definitely did that!
So what was James’ situation?
James is 24 years old. He’s been working hard and was fortunate to have the support of his family. Like many young people, he realised the effort required to look after himself, manage his money and work a full time job.
Through the guidance of his parents, he’s learnt the value of saving towards a property purchase. He’d been living at home, which helped him save some money and James enjoyed the family focus of living in a slightly rural area, with a small community shop and the like. This was an area where most people knew each other and the community has substance.
What where the difficulties for James?
James, like many young people with stable employment, had entered into credit facilities such as a credit card and a car loan. This made calculations tight for James and we had to work with him to ensure he could get enough lending for this unit. At Living Home Loans, we suggest for clients to plan for a property purchase and to beware before taking on a large car loan, in particular. A $30,000 car loan can reduce your borrowing capacity by around $100,000!
Once we had all the information, it seemed that the small deposit James had was not enough to buy the property he had found. We were able to find a lender that he ticked all the boxes for in terms of the amount he wanted to borrow. As he had less than 20% deposit, James would be required to pay Lenders Mortgage Insurance and this put the purchase out of his reach.
So how did we help?
Initially, we had to work out if James was able to borrow enough money for his ideal purchase. The numbers were working out. Then we had to really search through the options to see if we could overcome the need for more deposit. The only options available appeared to be a Family Guarantee Loan.
We had a meeting with James’ parents and found that they had a low mortgage on their own property. After going through some details it seemed that they would be suitable to offer a Family Guarantee to the bank. If only they would be happy to do that? We explained all the details around a Family Guarantee to James’ parents. The Guarantee would be offered to secure just the 20% deposit, which is required to remove Lenders Mortgage Insurance. I wondered, would they be keen to help James out in this way?
The answer… was a resounding YES. They were so happy to hear that they could be the lynchpin to enable James to make this purchase. His parents were thrilled to know that while he would truly be out on his own, he would also be close by. It was a done deal! James could now go ahead and negotiate his Offer to purchase the unit and start cultivating his dreams. James’ parents were also able to help him negotiate a great price with James being confident he could get the finance!
Then we got going to submit his application. There were a few extra things to do with a family guarantee application. And, there were a few hurdles to still get through. Because the unit was unique to that area, it was a bit tricky with the valuation side of things. Luckily, we work closely with our lenders, real estates and even valuers to ensure things run as smoothly as possible.
James was speechless
Success!! He ticked all the boxes for one of our lenders and he got the news that he was fully approved for his purchase. When I say he was speechless, well he was normally a very quiet mannered young man. However, this time I think he really had no idea what to say!
We did get a special visit from him in the Living Home Loans office, with a nice box of chocolates, candle and hand cream. I believe his mum may have had a hand in that one (thanks Jody). James’ mum made many phone calls and messages to us along the way as the whole family was very nervous right up until when James had the keys.
We understand that the process can be very nerve wracking when you have never done it before. Similarly, it can be just as nerve wracking when it is your ‘child’ trying to purchase their first home. Living Home Loans are specialists when it comes to First Home Owners. We offer practical advice and assistance to help cultivate your dreams.
Where is James at now?
Well, we know he is enjoying his new home and still dropping in for the occasional meal at his parent’s house. James’ unit has great facilities including a pool and inspiring views out to the mountains. James has some renovation plans, however the reality of owning a home is the new normal that he’s soaking in for now.
James has been able to buy in an area that is flagged for significant capital growth over the coming years. We look forward to reviewing his situation annually for him as part of our free annual review service. We will be showing him the benefits of jumping that initial hurdle (the hardest one of all) to getting himself into the property market!
Would you like to buy your first home?
Let us help you cultivate your dream of becoming a First Home Owner. Find out more about our Free First Home Owner Session: ‘Keys to Get in The Door!’. We’d love to help you get your first property!