First Home Buyer Perth – First Time Home Buyers Loan Options

FIRST HOME BUYERS FINANCE QUESTIONS

Updated First Home Grant Guarantee (FHBG/FHOG) – update July-2023

The federal government announced a new grant deposit scheme for first home buyers to help them purchase a home sooner.

Normally, if you provide less than a 20% deposit when you buy a property, lenders will expect you to pay lender’s mortgage insurance (LMI), which can cost thousands of dollars.

But with the FHBG/FHOG grant, you can put down just a 5% deposit without needing to pay LMI. (That’s because the government guarantees 15% of the loan, taking you up to that 20% mark.)

First Home Loan Deposit Scheme (FHLDS) is now the First Home Guarantee (FHBG/FHOG) grant and there are 35,000 new places to eligible first home buyers from 1-July-2023. The existing home ownership scheme is now called the Home Guarantee Scheme (HGS)

To be eligible you must be:

• An Australian citizen  or permanent residents (changed as of 1-July-2023) over 18 years of age
• Friends and family now purchase as part of a couple (changed as of 1-July-2023). Still maximum of 2 applicants.
• Singles with taxable income of up to $125,000 or couples with taxable income up to $200,000.
• You must have between 5% and 20% of the value of the property saved as a deposit.
• Repayments must be principal and interest for the full period of the agreement
• You must live in the property
• Scheme is now open to anyone who has not owned a property in the last 10 years (changed as of 1-July-2023).
• Family Home Guarantee is now open to single natural or adoptive parents or single legal guardians of at least one dependent

There are further maximum price thresholds.

For more information on the grant https://www.nhfic.gov.au/what-we-do/fhlds/

First home Guarantee from 1-July-2023 price caps are as follows:

What can you buy?

The scheme applies only to residential properties below a certain price threshold, which varies from region to region. Otherwise, you can buy almost any property, such as:

• An existing house, townhouse or apartment
• A house-and-land package
• Land with a separate contract to build a home
• An off-the plan apartment or townhouse

Regional areas

If you want to buy in a regional area, and you or your partner have lived there for at least a year, you can apply for a related program called the Regional First Home Buyer Guarantee – all the other conditions are the same.

How do I apply for the FHLDS?

Interested buyers can apply for the grant through participating lenders. At Orange Mortgage and Finance brokers, based in Perth Western Australia, we can determine your eligibility and help you understand the application process

How much can I borrow?

First home buyers finance needs a little more care than usual. Orange finance is based in Perth, Western Australia, so if you are looking for some first home buyers finance and you live in Perth, please make contact via the form below.

Usually the first question first home buyers ask is how much they can borrow?

There are two parts to this answer:

1. What is the maximum loan amount? And
2. The maximum loan to value (also known as the LVR) the bank is willing to lend to?

The maximum loan amount is calculated as a combination of:

• Your income.
• Living expenses.
• And if you have any other liabilities like credit cards, personal loan or car loans.

As a result, the amount you can borrow is your income minus expenses minus liabilities minus the new loan repayments. Even though interest rates are around 4%, the banks will stress the calculation assuming interest rates are at least 7.2%. We know interest rates will go up in the future so we need to make sure you can afford it when it does.

Now the second part of the question of what is the maximum LVR you can go to?

Most banks for first home buyers will set the maximum LVR at 95% including Lenders Mortgage Insurance or LMI. LMI is insurance the bank makes you pay to protect them. This means when the bank says you need 5% savings, you actually need 5% plus whatever the LMI costs is. Remember you will also have settlement agent fees and other costs you need to cover. Therefore, when you add this all up, you need to have about an 8% deposit for most lenders. There are a few lenders who will go to 98% LVR, so for that reason, you might need something closer to a 6% deposit.

Tips and Tricks to avoid in the home loan market

1. Watch out for introductory or honey moon rates especially if you have to pay LMI. When the honey moon rate ends, the new interest rate is usually much higher and because you had to pay LMI you probably won’t refinance because you’ll have to pay LMI again which means you end up stuck in a higher interest rate loan. Yuk.
2. Make sure you factor in all costs likes annual fees, monthly fees and application fees. Some lenders are giving special for first home buyers by waiving annual or monthly fees which means you could save over $11,000 over a 30 year loan.
3. If you are looking at a major bank, ask for discount. At Orange Finance, we always request a pricing discount from the large banks. We haggle on your behalf to make sure you are getting a better deal.
4. Also factor in customer service. Cost is definitely the most important thing but we’ve black listed some lenders for some period time because of poor customer service.

Most common questions Perth home buyer’s ask about first home finance:

1. Is part time or contract income OK for the bank? Yes and no. It depends how long you have been with the same employer and/or how long is remaining on your contract. If the part time income is permanent, some lenders are OK with only a month of work while other lenders require at least 6 months with the same employer. For contract income, most lenders require you to be at least 6-12 months with the same employer.
2. What if I have bad credit? Well, there’s bad and then there’s bad. It isn’t uncommon on credit files to have 1 or 2 minor issues like a telco default or utility default and this wouldn’t be considered bad. As long as these are under $1000 and have been paid, some lenders are OK with this. Have a read of https://www.orangefinance.net.au/how-does-your-credit-score-work/
3. Can my parents go guarantor so I don’t have to pay Lenders Mortgage Insurance? Yes, this is fairly common. As long as they have paid most of their own home or an investment property off. We have a small booklet which explains this in more detail. Ask us for a copy.
4. Is it worth getting pre-approval? Yes. It makes sure a lender has given the all clear and it can also give you some bargaining power when negotiating a purchase.

First-home buyer finance can be very specific for certain lenders. Some lenders are giving applicants special offers on interest rates and/or fee waivers which can save you considerable amount over the life of the loan. For example, there are some lenders waiving their annual fees which could save you over $11,000 over the life of a 30 year loan.