3 simple tactics for first homebuyers to help break in

With housing affordability feeling more out of reach for first home buyers, many wonder how they can actually get into the housing market. 

It’s no wonder then, that most people are looking for ways in - a pathway, so to speak. Thankfully, if you’re a first home buyer, there are some tactics you can leverage. 

First, does my home loan deposit have to be 20%?

The general rule of thumb is to save up for a 20% deposit, the difference in a typical LVR - loan-to-value ratio. In short, most lenders will give borrowers a loan that’s worth up to 80% of the property’s value. That being said, when house prices are soaring in most of the capital cities, even 20% can feel like an insurmountable amount. 

The question is, do you actually need 20%? If you’re a first home buyer, you might be able to save up only 5% of a home’s value for that initial deposit and some providers offer specialised home loans with this flexibility. 

Keep in mind that with a lower initial deposit that your monthly repayments will be higher than if you had a bigger initial deposit. Make sure to calculate your monthly repayments so that you know you can meet your loan repayments.

Government support for first home buyers

If you’re a first home buyer, you can apply for the government backed First Home Buyers Guarantee (FHBG) which can guarantee a loan as little as 5%. Part of the advantage of the FHBG is that, even with a loan-to-value ratio below 20%, you can be exempt from paying Lenders Mortgage Insurance (LMI).

Also, keep in mind that you may have access to state or territory specific schemes. Some of the schemes you can apply for are:

Make sure to check that you meet the eligibility requirements and the dates for when these schemes finish. 

Superannuation home saver scheme

Not sure where to put the savings for your home loan deposit? While a high interest savings account is a great option, utilising the tax advantaged environment from your superannuation might be another good option. 

Essentially, the first home super saver (FHSS) scheme allows you to make either before or after tax contributions to your super that sit in your fund and grow until you’re ready to withdraw and pay for that house. 

It’s worth mentioning that there are some terms and conditions, so check that you’re eligible to apply. Also, you’ll be limited to $15,000 worth of contributions every financial year and a total balance of $50,000. On top of this, deposits made through before tax salary sacrifice are taxed at 15 per cent while any after-tax contributions are not taxed. 

Having considered these tactics, are you ready to get your first home loan? Here at Mozo we let you compare between home loan providers so that you can get the loan that works for you.