Understanding Your First Home Buyer Budget
Saving for your first home represents one of the most significant financial commitments you'll make. For first home buyers across Victoria and Australia, understanding how much you need to save is the crucial first step in your property ownership journey.
Your first home buyer budget should account for several key components beyond just the property price. You'll need to consider your deposit, stamp duty (though first home buyer stamp duty concessions may apply), conveyancing fees, building and pest inspections, and moving costs. Creating a comprehensive first home buyer checklist will help you identify all these expenses upfront.
Most lenders require a deposit of at least 5% to 20% of the property's purchase price. However, if you're saving less than 20%, you'll typically need to pay Lenders Mortgage Insurance (LMI), which protects the lender if you can't meet your repayments.
Low Deposit Options and Government Schemes
The Australian Government offers several initiatives to help first home buyers enter the property market sooner:
First Home Loan Deposit Scheme: This program allows eligible first home buyers to purchase a property with a 5% deposit without paying LMI. The government guarantees up to 15% of the property value, reducing the risk for lenders.
Regional First Home Buyer Guarantee: Designed specifically for those purchasing in regional areas, this scheme operates similarly to the First Home Loan Deposit Scheme but with different property price caps and location requirements.
First Home Owner Grants (FHOG): State-based first home owner grants provide financial assistance to eligible buyers. In Victoria, the grant amount and eligibility criteria vary, so it's worth researching what applies to your situation.
First Home Super Saver Scheme: This initiative allows you to save for your deposit through your superannuation fund, potentially benefiting from tax advantages on your contributions.
These low deposit options can significantly reduce the amount you need to save before applying for a home loan.
Maximising Your Savings Strategy
Building your deposit requires discipline and a clear savings plan. Consider these approaches:
- Set a realistic timeline: Calculate how much you need and determine a monthly savings target
- Open a dedicated savings account: Keep your deposit savings separate from everyday expenses
- Automate your savings: Set up automatic transfers on payday
- Review your expenses: Identify areas where you can reduce spending
- Consider additional income: Take on extra work or sell items you no longer need
Ready to get started?
Book a chat with a Mortgage Broker at James Hawkins Mortgage Broker today.
Gift Deposits and Family Support
Many first home buyers receive financial assistance from family members. A gift deposit can help you reach your deposit goal faster or avoid paying LMI. However, lenders have specific requirements for gift deposits, including:
- Documentation proving the funds are a genuine gift, not a loan
- A signed declaration from the person providing the gift
- Evidence of the donor's ability to provide these funds
Your mortgage broker can guide you through the documentation requirements to ensure your gift deposit meets lender criteria.
Understanding Home Loan Options
Once you've saved your deposit, you'll need to evaluate different home loan options. Key features to consider include:
Interest Rate Types:
- Variable interest rate: Fluctuates with market conditions, potentially offering interest rate discounts
- Fixed interest rate: Locked in for a set period, providing repayment certainty
- Split loans combining both variable and fixed components
Additional Features:
- Offset account: A transaction account linked to your home loan that can reduce interest charges
- Redraw facility: Allows you to access extra repayments you've made
Understanding these home loan options will help you choose a product that suits your financial situation and lifestyle.
The Pre-Approval Process
Before you start house hunting, obtaining pre-approval is a valuable step. Pre-approval involves a lender assessing your first home buyer eligibility and confirming how much they're willing to lend you.
Benefits of pre-approval include:
- Understanding your borrowing capacity before you search
- Demonstrating to vendors that you're a serious buyer
- Speeding up the final home loan application process
- Identifying any issues with your financial position early
Pre-approval typically lasts 90 days and gives you confidence when making offers on properties.
Preparing Your First Home Loan Application
When you're ready to apply for a home loan, you'll need to provide comprehensive documentation. Your first home loan application will typically require:
- Proof of identity (driver's licence, passport)
- Income verification (payslips, tax returns, employment contracts)
- Bank statements showing your savings history
- Details of existing debts and financial commitments
- Information about the property you're purchasing
Working with an experienced mortgage broker can streamline your first home loan application and improve your chances of approval. A broker can also help you access suitable first home buyer grants and concessions you may not know about.
Calculating the True Cost of Homeownership
Beyond your deposit and mortgage repayments, factor in ongoing costs:
- Council rates and water charges
- Building and contents insurance
- Maintenance and repairs
- Strata fees (for apartments)
- Utilities
Understanding these expenses ensures you don't overextend yourself when buying your first home.
Taking the Next Step
Saving for your first home requires planning, commitment, and knowledge of available support programs. Whether you're aiming for a 5% deposit, 10% deposit, or larger amount, having professional guidance throughout the process can make a significant difference.
As specialists in helping first home buyers, we understand the challenges you face and the opportunities available to you. We can assess your first home buyer eligibility, explain first home buyer stamp duty concessions in your state, and help you choose appropriate home loans with competitive features.
From navigating the First Home Loan Deposit Scheme to understanding when a variable or fixed interest rate suits your circumstances, we're here to support you through every stage of your property purchase journey.
Call one of our team or book an appointment at a time that works for you. Let's discuss your situation and create a tailored strategy to help you achieve your first home ownership goals sooner than you might think possible.
