If you are in the market or considering getting into the market for your first home, then you are probably a little overwhelmed trying to work out how much you need to get your foot in the door. Now, if you have someone in your family that is happy to be a family guarantor for you, then you are definitely one of the lucky ones as you need very little. We will put up a detailed post about how to get a loan using a family guarantor in the coming months.
So, if you don’t have a family guarantor, how much do you need to buy your first home?
It varies from State to State in Australia, depending on the price of the property, how much deposit you have and whether you are eligible for any grants.
We’ve broken down the key things involved:
- Stamp Duty
- Legal and Bank Fees
- Lenders Mortgage Insurance
1. How much deposit do you need for a first home owner loan?
For first home owners, getting the deposit together is definitely the biggest challenge. If you have 20% of the purchase price of the property you wish to buy, then you are seriously laughing. Banks are a lot easier on people with 20% deposits and your home loan product options really open up for you. But most first home owners don’t have 20% deposit. If you have a family guarantee, also laughing…. As you don’t need a deposit AT ALL! But again, most people are not that lucky. The ‘guarantee’ can even cover purchase costs. So, if you are coming up with a deposit yourself, the bare minimum that you will need is 5% of the purchase price. More is always better, but 5% will get your foot in the door.
So this is what a 5% deposit looks like for the following property prices:
- $400,000 price = $20,000 deposit
- $300,000 price = $15,000 deposit
- $200,000 price = $10,000 deposit
The figures above are assuming you are going to live in your new property, what the banks call ‘owner occupied’. If you are looking to buy your first home as an investment, then you will need a minimum deposit of 10% of the purchase price.
2. How much will stamp duty cost for a first home owner loan?
This is the part of the equation that varies greatly from State to State and depending on if you will be living in your new home (as an owner occupier), or renting it out as an investor.
At the time of writing this post, the stamp duty costs for first home buyers are:
Example Stamp Duty Fees by State, for First Home Buyers of $400,000 property
|Type of home owner||NSW||QLD||VIC||TAS|
(if existing house)$14,380
(if a new house)
Find out what stamp duty will cost you, using our Stamp Duty Calculator.
3. What sort of legal expenses and bank fees can a first home buyer expect?
We suggest having around $2,000 in total available for these expenses. You will normally pay between $1000-$1400 for your conveyancer, searches and rates adjustments. The conveyancer is your legal person or solicitor who assists you with the legalities of signing Contracts and arranging for settlement (or exchange of finances for your purchase). You normally get what you pay for so less is often not more here. Having an experienced person looking after your biggest commitment is essential.
There will be minor settlement fees from the lender which we will clarify for you before you put in your application. This is normally no more than approx. $400. There are some mortgage registration fees which are also paid to the government of approximately $200.
4. How much will Lenders Mortgage Insurance cost a first home buyer?
Lenders Mortgage Insurance (or LMI) is something banks require you to purchase if you don’t have at least a 20% deposit. It is an insurance you take out that is really for the banks. It covers them in case you default on your home loan. The more deposit you have, the less you will pay in LMI.
For example, here are a couple of scenarios for first home owners with the amounts you would pay for LMI:
- Purchase price $400,000 have $5% deposit ($20,000). LMI = $12,768
- Purchase price $400,000 have $10% deposit ($40,000). LMI = $6,912
- Purchase price $400,000 have $15% deposit ($60,000). LMI = $3,842
- Purchase price $400,000, have 20% deposit ($80,000). LMI = $0
Find out what LMI will cost you, using the Genworth LMI Calculator.
5. What grants are available to first home owners in Australia
Now we get to the good part! How much money will the government help you with. So once again, this is dependent on many different things:
- The price of the property you want to buy
- What state you will be buying in
- Where the property is (if in the city or regional)
- If you are buying a new or existing home, and
Grants are only available to first home owners who will be living in their property for at least 12 months as owner occupiers.
Currently there are First Home Owner Grants (FHOG) offered by each of the States. Every State in Australia, except South Australia, waives most of the Stamp (Transfer) Duty Fees for first home owners purchasing properties as Owner Occupiers (see some examples in the information given above).
- NSW First Home Owner Grant
$10,000 grants are available if you are buying or building a new home valued up to $750,000. Find out more
- QLD First Home Owner Grant
$15,000 grants are available if you are buying or building your new house, unit or townhouse (valued at less than $750,000). Find out more
- VIC First Home Owner Grant
$10,000 grants are available if you are buying or building a new house, townhouse, unit, apartment or similar valued at $750,000 or less. If you live in regional Victoria the grants are $20,000. These end 30 June 2020. Find out more.
For other States visit the Federal Government website which links to each of the State’s First Home Owner Grant Schemes.
The Federal Government introduced the First Home Loan Deposit Scheme this year
Although there are only a small number of grants available, if you are successful in nabbing one, the grant could save you up to $15,000 worth of LMI costs. Basically, this grant is the government covering your Lenders Mortgage Insurance (LMI) for you. It is a tricky grant to get with many specific requirements. However, we have been successful in navigating the process and getting grants for our clients. Read more here.
We hope this post has been helpful to give you a broad understanding of how much money you will need to purchase your First Home.
Of course this is very generalised and if you would like us to work out your specific figures, please book a Free First Home Owner Session: ‘Keys to Get in The Door!’ and find help to secure yourself a home today.