New research has revealed there is a lot of confusion and uncertainty preventing people from realising their ownership dreams.
Mortgage broking group Aussie reports that seven in 10 first home buyers in Australia don't know how to take advantage of current property market conditions.
Meanwhile, a majority (58%) say they are struggling to navigate the mortgage market themselves, often feeling overwhelmed and confused.
According to Aussie, a lack of understanding around the numerous Federal and State Government housing initiatives on offer is exacerbating this confusion.
Such initiatives include:
- The First Home Loan Deposit Scheme (FHLDS)
- The First Home Owner Grants (FHOG)
- The First Home Super Saver Scheme (FHSSS)
- The HomeBuilder Scheme
Buying a home or looking to refinance? The table below features home loans with some of the lowest variable interest rates on the market for owner occupiers.
Smart Booster Home Loan
- Discount variable for 1 year <=80% LVR
- No ongoing fees
- Unlimited redraw facility
Monthly repayments: $1,476
- Discount variable for 1 year
- No ongoing fees
- Unlimited redraw facility
Base criteria of: a $400,000 loan amount, variable, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. If products listed have an LVR <80%, they will be clearly identified in the product name along with the specific LVR. The product and rate must be clearly published on the Product Provider’s web site. Monthly repayments were calculated based on the selected products’ advertised rates, applied to a $400,000 loan with a 30-year loan term.
Notably, eight in 10 first home buyers were not clearly aware of the FHLDS, which will be available for another 10,000 loans this financial year, while a third of respondents (32%) didn't understand any of the initiatives mentioned.
The FHLDS is a government initiative designed to help eligible first home buyers secure their first home loan with a deposit as low as 5%, while the government essentially acts as a guarantor for up to 15% of the value of the home to help save the first home buyer from having to pay the lender for Lenders Mortgage Insurance (LMI).
The scheme's first 10,000 places, released on 1 January 2020, showed strong demand for the program particularly among first home buyers under the age of 30.
According to Aussie Chief Customer Officer David Smith, those who are eligible for the scheme but aren't clear on what it is could be missing out on an opportunity.
"Our research reveals just how overwhelming the property market can be, whether it’s the complex lingo, the changing schemes and grants, or understanding what different interest rates mean; it’s not surprising that many first home buyers find it difficult to know if they are getting a good deal," Mr Smith said.
“With some of the lowest home loan interest rates we’ve ever seen, alongside a fall in property prices, and the government launching new grants and schemes, this represents a huge opportunity for Australians to secure their first home.
"However, it’s clear that those same factors are leading to ‘information overload’ which could be preventing first home buyers from making their move."
According to Aussie's research:
- 98% of first home buyers believe there are challenges to achieving buying their first home
- 53% believe getting a loan is a key challenge
- 71% of first home buyers are prioritising building their deposit savings during recent months
“Getting on the property ladder is within arm’s reach for anyone if they dedicate themselves to growing their savings, but confusion around what can help Australians get there more quickly and easily is stopping many aspiring first home buyers from achieving their goals," Mr Smith said.
To get into the market, five in six (84%) first home buyers said they want financial guidance.
“Buying a home is likely to be one of the biggest financial decisions of someone’s life but with so much confusion out there, first home buyers have been coming to Aussie in droves in recent weeks to help tackle their information overload and get a better grip on the current market opportunity and what it means for them,” Mr Smith said.
“We expect this trend to continue as home loan experts, like Aussie Brokers, help first home buyers to cut through the confusion, explore their options and find a good deal for their circumstances.”
With this in mind, Mr Smith and Aussie have listed 10 things that could help you buy your first home.
Aussie Home Loans' top 10 tips to buy your first home
1. Start saving early
"Knowing how much you need to save for a home deposit can feel overwhelming as you may not have decided on what you’re looking for yet. But one thing is clear, setting a savings goal early can make all the difference," Mr Smith said.
"It may seem obvious, but the sooner you start the higher your chances of putting yourself in a better position in the future."
2. Write a list of what you will and won’t compromise on
"We all lead busy lives and searching for your dream home is a journey. One important time saver, to do before anything else, is to write down what you absolutely need from your future home versus what your ‘nice to haves’ are. By having that clearly in mind first, it can help ease the whole process and save a lot of your time.
"Consider what aspects of a home you won’t negotiate on, like how many bedrooms you need, the location or whether you want some kind of outside space or backyard.
"Then consider the things that you would be happy to compromise on, like if you really need a walk-in robe or a second garage if it will cost you more or mean you can’t buy in the location you want to."
3. Do your research
"There is more information available at our fingertips than ever before, but finding what you need to know can be challenging, so when putting in the work to start saving, you may have more options to help you get into the property market than you think.
"It’s important to take time to do your research or speak to a mortgage broker to see if you may be eligible for schemes like this to support you with achieving your first home."
4. Be realistic
"Buying your first home is exciting but it’s important to work out how much you can afford to spend before you start house shopping. Tailoring your search for a home according to what you have the capacity to afford will help avoid any disappointment.
"Seeking advice from an expert who gets to know your circumstances and is local to your area can help you understand what additional costs you may need to consider, helping you know how much of an extra buffer you may want to save – so you don’t get caught out."
5. Say goodbye to confusing mortgage mumbo jumbo
"A popular way to wave goodbye to any confusion is to seek expert guidance to help support you through your journey.
"With 67% of first home buyers intending to enlist the help of a mortgage broker, like Aussie, most recognise the value brokers bring to take the hassle and complexity out of the process in finding a good home loan deal for you."
6. Take advantage of low interest rates now
"With so many different interest rates on the market, it’s hard to know if you are getting a good deal. There are many important factors to consider when looking for a home loan, and the interest rate is one of them.
"Right now, is an optimal time for first home buyers to lock in a good interest rate to buy your first home, with record low rates."
7. Get some peace of mind with a pre-approved loan
"Getting pre-approval for a loan can help ease your mind and is beneficial in many ways. It gives you clear indication of the amount of money you can borrow so you can better determine the price of homes you should be searching for.
"Another benefit of having a pre-approval is the peace of mind of knowing that when you find that perfect home, you can make an offer that you can afford."
8. Make the most of inspections
"Checking out houses can be fun and exciting. If you want to buy an existing property, making the most of open inspections is a must. Photos will never do justice to seeing a property in person.
"This allows you to gauge what kind of shape the home is in and if it’s really right for you.
"Take photos, open cupboards, turn lights on, and try taps. It is also a good idea to walk around the area in daylight and night time. Being thorough in your inspection can avoid the headache of performing possible future repairs."
9. Buy a home for tomorrow
"It is important to keep in mind that the home you buy, may very well be your home for many years to come. With all the effort, persistence and control you need to save, research, and locate a house, it’s important you are buying something you won’t outgrow too soon.
"Ask important questions like if you want to raise a family in this home, do you need to be near any specific schools, or have a spare room to be able to host out of town family and friends, to help avoid being too led by emotion when making a decision."
10. Make sure you can still enjoy a great lifestyle after regular mortgage repayments
"Taking all the necessary steps to know what you can afford, finding a good interest rate and finding the right loan that’s best for you, should make the whole process much easier – leaving you to be able to sit back and relax, enjoying the things you love to do while being a proud first home owner."
The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered which includes retail products from at least the big four banks, the top 10 customer-owned institutions and Australia’s larger non-banks:
- The big four banks are: ANZ, CBA, NAB and Westpac
- The top 10 customer-owned Institutions are the ten largest mutual banks, credit unions and building societies in Australia, ranked by assets under management in November 2020. They are (in descending order): Credit Union Australia, Newcastle Permanent, Heritage Bank, Peoples’ Choice Credit Union, Teachers Mutual Bank, Greater Bank, IMB Bank, Beyond Bank, Bank Australia and P&N Bank.
- The larger non-bank lenders are those who (in 2020) has more than $9 billion in Australian funded loans and advances. These groups are: Resimac, Pepper, Liberty and Firstmac.
Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site.
In the interests of full disclosure, Savings.com.au, Performance Drive and Loans.com.au are part of the Firstmac Group. To read about how Savings.com.au manages potential conflicts of interest, along with how we get paid, please click through onto the web site links.
*Comparison rate is based on a loan of $150,000 over a term of 25 years. Please note the comparison rate only applies to the examples given. Different loan amounts and terms will result in different comparison rates. Costs such as redraw fees and costs savings, such as fee waivers, are not included in the comparison rate but may inﬂuence the cost of the loan.
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