It’s been a roller-coaster ride for first-home buyers. The first half of 2019 was in favour of buyers, as the market was slower with more affordable prices. But over the second half of 2019, the market recovered quickly and first-home buyers were somewhat left behind.
With the impact of the election, record low-interest rates (cash rate set by the RBA) and the new First Home Loan Deposit Scheme launched by the government on 1 January 2020, first home buyers are again on a roller-coaster ride.
Faced with lower interest rates on their savings, First Home Buyers are finding it harder and slower to save for that 20% deposit. The lower borrowing rates have also created a massive influx of mortgage applications, contributing to banks and lenders tightening up their lending criteria.
On top of this, the market is experiencing low levels of supply and high demand which drives prices upwards. Great for sellers, but overwhelming for first-home buyers.
On the 1st of January 2020, the government launched the new First Home Loan Deposit Scheme to help first-home buyers – making it possible to obtain a mortgage with just a 5% deposit.
So with all these ups and downs, we want to make sure that our first-home buyers are armed with the best tips to not just enter the market, but to do so successfully!
1. Don’t let FOMO get the best of you.
The fear of missing out of the First Home Loan Deposit Scheme may sway you too quickly! Try not to rush your decision in hopes to nab a great home, in a desirable location, with a small deposit and a big loan.
We’d recommend you to be more open to areas with higher supply and better prices. In Sydney that includes areas such as St George, Canterbury-Bankstown, Sutherland, Gladesville and Ryde.
2. Keep a clean financial record because banks can now assess as far as 24 months of your bank account!
Even if you have a decent deposit, banks will assess every transaction you’ve made in the last 24 months. Before online credit reporting, banks only assessed the last 6 months of your bank statements – these are different times!
So we recommend demonstrating good spending habits for 2 years before you start applying for a mortgage.
3. The First Home Loan Deposit Scheme is only given to 10,000 applications a year, which means only the best prospects will be chosen.
What the lenders are looking for are those with low credit risk and consistent, reliable income. So as soon as they detect bad spending habits, debt and questionable income, you will be disqualified!
4. Don’t increase your budget just because of the 5% deposit.
Many buyers are making the mistake of giving themselves a larger budget to “take advantage” of the 5% deposit. This may cause you long-term issues with repayments you can’t afford.
Instead of hoping to land your dream home with the new government scheme, stay modest and focus on entering the market with a long-term strategy.
5. If you’re strongly set on desirable and high-demand locations, opt for older properties.
Desirable locations generally come with inflated prices. Avoid borrowing more money and instead aim to get a mortgage with good rates and repayments you can afford – long-term.
Older Art Deco apartments and even smaller houses in desirable areas consistently show good prospects when selling. It may not be your dream home, but having a long-term strategy to sell with profit, in the end, is far more fruitful!
If you’re a first-home buyer looking into the St George area, give me a call and let’s look at the best way for you to finally be a first home owner!