Question: My wife and I have permanent jobs which are netting us $5,500 every month. We are interested in buying a property in regional Victoria (Kilmore). The house is worth $245,000 and is currently being built. We have spoken to our bank and it is only providing us 90% of the value of this property. This leaves us short by $24,500. We have savings of $7,000 and would be eligible for the first home Owner Grant plus state grant plus regional area grant. Could you suggest any other possible way in which we can structure our loan so that we can cover this shortfall of $24,500 and thus get our foot into this property as soon as possible?
Thanks, Manu

Answer: Hi Manu,
Yes, unfortunately in rural areas you are restricted when it comes to the amount you can borrow. Now, the property purchase will cost approximately $254,000 in total funds to complete ($245,000 purchase price plus approximately $9,000 in stamp duty costs etc).

The loan amount on offer to you should be in the vicinity of $220,500 which means you require a total of $34,500 to complete.

With your $7,000 in savings, $14,000 First Home Owner Grant, $7,000 new home bonus from the Federal Government - plus the Victorian government provides an additional $3,000 bonus grant - and $2,000 for regional area purchase, your total available funds are $33,000 which means you need to realise an additional $1,500 to complete - minimum.

Keep in mind also that a loan of 90% will attract a lenders mortgage insurance (LMI) premium that can in most cases be added to the top of the loan. You will need to check with your lender as to whether this is the case with your property being located in a rural area.

With LMI and the shortfall of $1,500, one option may be to check with your lender as to whether they will accept a 'gift' of the balance of the costs from a family member - if that is an option for you.

Manu, also keep in mind that when purchasing your first home, there can be other costs that you won't have budgeted for, like moving costs, insurance, and if it's a new property, there may be essential things such as a clothesline, letter box, and other items that really add up. So please consider ALL the costs before you commit. Good luck!

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