First Home Buyer

The main question many first home buyers ask is how much deposit is needed to actually purchase a home in South Australia? 

Well that depends on what type of loan product is used, which lender you finance through, your level of income, and any government grants you get your hands on. 

Generally its good to have a deposit that is at least 12% of the purchase price as a starting point (covering 5% of purchase price, stamp duty and lenders mortgage insurance). That will generally get you a loan with a mainstream lender with a competitive interest rate. When less deposit is available, a loan may be still possible. Here are some other options

• Homestart, a low deposit option, deposit needed from 3% purchase price. Repayments and interest rates are often higher than the mainstream lenders. These loans are often refinanced in 2-5 years to a mainstream lender.

• A mainstream lender, deposit from 8% purchase price (covering 2% of purchase price, stamp duty, and lenders mortgage insurance). This lower deposit option product requires strong income and will come with a higher than normal interest rate.

• A Parental Guarantee loan, starting from nil deposit. Parents ideally should be still working and have paid off a reasonable portion of their home loan, or have investment properties/other assets. 

• Certain professions such as doctors, accountants, lawyers, and certain other eligible professionals, may qualify for special industry benefits that reduces their deposit requirements. This is either in the form of lender mortage insurance waivers (loans up to 90% of purchase price) and secondary top up loans additional to the home loan

This depends on how much you are saving per month. Generally you will need to show consistent saving over a 6 month period.

Lenders have a concept called “Genuine savings”, which is just a lending policy aimed at stopping someone who has obtained a deposit from elsewhere (i.e. a deposit gifted from family) obtaining a home loan, who can’t demonstrate the ability to save or meet ongoing commitments.

In the majority of cases 5% deposit is required to be genuine savings, unless the loan is less than 90% of the purchase price, although this can vary between lenders

Some lenders count payment of rent, usually 6 months history towards genuine savings.

Most certainly. The money will need to be a gift and non repayable. 

Do your research, get professional advice and understand loan products available to you and explore all your options. Your level of income, level of savings, household budgets, and any changes to your circumstances in the future are all key factors in determining what loan type is best for you.

Deciding between variable and fixed interest rates is a personal preference. We can talk you through the options currently on offer and help you with this decision.

Variable rate home loans are generally more flexible and have more features than fixed rate home loans. The interest rate fluctuates with the market ensuring you always have a market rate for your home loan.

Features of variable loans can include such things as redraw facilities and extra repayment options. 

Fixed Rate home loans ensure you have the same repayment over a fixed term. You lock in your interest rate and initial repayment over an initial agreed term usually between 1 and 3 years. Fixed loans have less flexibility and often have restrictions to redraws or extra repayments over the fixed term.  If you look at breaking your fixed rate home loan, you will generally have to pay a break cost which can be quite significant.

Generally you need to be an Australian citizen and should not have owned a property in Australia before.

You can refer to the state government website below for more details.

http://www.revenuesa.sa.gov.au/grants-and-concessions/first-home-owners

Stamp duty is a State Government Tax that must be paid when buying property. In South Australia there is limited opportunities for exemptions or relief of this tax for residential properties.

Other costs may include conveyancer fees and purchase adjustments associated with council rates, water, and emergency services levy

Redraw is a loan feature that allows you to access any early repayments made on your loan repayments on your loan. For example, if you made $5,000 in advance repayments on your home loan, a redraw feature allows you to get access to the $5,000 of repayments, put $5,000 back into your bank account, and increases your loan back to where it previously was as if you had not made those repayments in the first place.

An offset account is a separate bank account that is linked to your loan. For any funds held in your bank account, automatically offsets against the loan when it comes to the bank paying interest. For example, if your loan balance is $400,000 and you have $5,000 in your offset account, you only pay interest on $395,000.

A loan redraw feature is generally availiable in all basic home loan products. An offset is seen as a premium feature, generally home loan prducts that allow this feature often come with additional fees and higher interest rates compared to the basic loan products. 

In the fine print of many lenders terms and conditions a lender could refuse a redraw request or ask you for further information on use of the funds. This does not happen often, but can happen. If you want full peace of mind in gaining access to your additional repayments or excess savings, then its best to get an offset feature.