Home Loan Repayment
As a first home buyer, trying to wrap your head around the home buying process can be overwhelming. With so much information available and industry experts providing opposing opinions, you may not know where to start. 

If you are looking to purchase your first home, it's important to get the facts straight before you start. Listed below are the top first home buyer myths busted.

1. You need a 20% deposit to take out a home loan

Saving for a home loan deposit is one of the biggest hurdles for first home buyers. A lot of people talk about having a 20% deposit which is calculated by multiplying the purchase price by 20%. Although this is a great position to be in and allows you to avoid mortgage insurance, this is not your only option.

Most lenders offer home loans up to 95% of the purchase price, which can help you get into the property market sooner, particularly if you have found your dream property before reaching 20% deposit. So your deposit can be as little as 5% of the purchase price.

The down side is that if you borrow more than 80% of the value of the property, lenders mortgage insurance will probably apply which adds to thousands of dollars and is added to your loan. Lending a higher proportion of the purchase price can have other ramifications like a higher interest rate, tighter criteria around employment and savings history etc. 

2. I can't buy an investment property 

As a first home buyer, you can purchase a property to live in or as an investment. Many first home buyers find that buying an investment property first has been more beneficial. Buying a first home as an investment can have long term benefits and help put young Australians in a better financial position. For example, you can continue to live at home and save on living costs and the rental income can be used to help with the loan repayments.

You may also have access to a wider range of properties. Some properties may not be the preferred location or size to live in, but, as an investment property, are perfect. Finding a property that costs less may be easier if you are not planning to live in it, potentially making the loan amount and repayments more affordable.

3. A deposit is all I need to save for

A home loan deposit is just one of several purchase costs involved. Many first home buyers get caught out thinking that they only need to save for a deposit and have missed on a property as they did not have the funds to cover the other costs. The other purchase costs you will need to save for include:
  • Stamp duty
  • Pest and building inspections 
  • Lenders mortgage insurance (if you borrow more than 80% of the purchase price but this may be added to the loan)
  • Loan establishment fees
  • Solicitor and conveyancer fees
  • Moving expense

4. I have a bad credit history, so I can't get a home loan

You may assume that a default on your credit report means you will not be approved for a home loan, but this is not necessarily the case. Many lenders now provide home loans that are specifically designed for borrowers who have a bad credit history. 

When looking for a home loan, it is important to not assume that all lenders are the same when it comes to bad credit. For some lenders, the story behind your credit issues is very important and they will look at your individual situation to provide a solution to suit.

If you are not sure whether you have a default on your credit file or not, now is the time to check. Visit My Credit File (link) to receive a copy of your credit report.

If you are a first home buyer eager to get your foot on the property ladder, give our lending team a call on 13 72 62 or leave your details here. Our friendly team can crunch the numbers for you and help work out your options. Once you know how it all stacks up you will be able to develop a plan to help you buy your first home sooner. 

It can be confusing to know whether to get a variable rate or fixed rate mortgage, and what features are important. That's why it's important to not only check the right rates, but make sure that you're getting the right features in your home loan. Get help choosing the right home loan

Anouska Linz

Anouska Linz is Manager, Online Sales at State Custodians and has over 10 years’ experience in financial services, both in broking and banking. Holding a bachelors degree in accounting, Anouska quickly discovered a love for mortgage lending and assisting people to achieve their home ownership goals. She leads a team of highly experienced lending specialists who are passionate about finding lending solutions which result in real wins for the customer. She is also a massive netball fan.

For more information on our home loans, visit www.statecustodians.com.au or call 13 72 62.