August 03, 2012
Newcastle & Lake Macquarie first homebuyers may be unaware that there are more ways than one to get into the property market.
A different loan and/or purchase strategy may see first time buyers able to save more money towards their deposit and enter the property market with greater confidence.
Sharing property ownership between two or more people, such as a friend, family member or de-facto partner, lets both parties pool their resources to pay a deposit, maximise borrowing power and share property buying and management costs. Legal guidance is essential when considering this approach.
Find your feet with a family equity loan
A parent/s can act as the loan guarantor for a homebuyer, by agreeing to let the homebuyers use the guarantors’ property as security. Having a guarantor will not help to increase your borrowing power but it will help to bridge the deposit and upfront expenses gap and it will likely help you avoid having to pay lenders’ mortgage insurance. Anyone who is considering being a guarantor for a property loan is advised to seek independent legal and financial advice beforehand. Most lenders will insist on this, prior to accepting a guarantee.
Take advantage of the new Government incentives
In the budget handed down by the O’Farrell Government on 12 June 2012, New South Wales first homebuyers have been encouraged to “think new”, if they wish to benefit from government incentives.
From 1 October this year the First Home Owner Grant will increase from $7,000 to $15,000 on newly built or off the plan properties, with a value of up to $650,000.
The grant will remain in place until 31 December 2013, but from 1 January 2014, it will drop back to $10,000.In addition, first home buyers will be exempt from stamp duty if they purchase a newly built home with a value of up to $550,000 and will receive a stamp duty concession for a newly built home valued between $550,000 and $650,000. Similarly, those purchasing a vacant block of residential land to build their home on will pay no duty on vacant land valued up to $350,000 and will receive a concession on duty for vacant land valued between $350,000 and $450,000.
Whilst this is all great news for buyers of newly built homes or even vacant land, there is little help in sight for the majority of the market who are looking at purchasing existing properties. The current First Home Owner Grant of $7,000 for an existing property will be axed from 1 October.
We encourage first homebuyers to carefully research the benefits and pitfalls of both property types, regardless of the incentives on offer and to give careful consideration to the timing of their purchase.
Home before investment is not a rule
People who want to get into the property market but may have been priced out of buying a home in the area they want to live may consider purchasing an investment property before a home. A clever investment property purchase and a little patience could see these homebuyers-to-be residing in their desired suburb sooner.
Hopefully, after a while, the equity built up in the investment property can be used to purchase a home. Lenders will lend money against equity, depending on the rest of the borrower’s financial situation.
Before making any decisions, speak to an accountant and/or financial planner to weigh up the cost versus benefit of this strategy.
For more information contact Richard Windeyer on 1800 01 LOAN or click here to "Book a Meeting"