July 19, 2017
So, you want to get into the home ownership market, but you’re not sure how much deposit you need to get started?
You may be surprised to learn that with as little as 5% of the purchase price, you could be on your way to fulfilling your home ownership dream.
There are many lenders, including the Big Four Banks, that are quite willing to lend up to 95% of the purchase price, as long as you have a stable employment history, a proven savings record with genuine savings and a clear credit record.
You will also need to be aware that Lenders Mortgage Insurance (LMI), a one off premium that is charged to your loan if your deposit is less than 20% of the purchase price, will be applied.
What is considered as Stable Employment and Genuine Savings?
Whilst there is no hard and fast rule on stable employment history, most lenders prefer to see a 12- 24 month term with the same employer, or at worst, within the same field of employment.
With genuine savings, you will need to show that you have saved your deposit over a three month period. Lump sums such as tax refunds, proceeds from sale of an asset or gifts from family members does not qualify as genuine deposit, unless it has been held in your account for longer than 3 months.
If you are looking to purchase your first home to live in, there could be some more pleasant surprises for you. The First Home Owners Grant, also known as FHOG, is available to those looking to purchase their first home to live in. In WA, if you construct a house or purchase a newly constructed home that has not been lived in, you will be entitled to $10,000. There are restrictions on the purchase price, namely the price cannot exceed $750,000 if purchasing under the 26th parallel, and $1,000,000 if purchasing above the 26th parallel.
First home buyers in WA purchasing an established property can qualify for stamp duty concessions - if your purchase price is $430,000 or less, you will be exempt from paying stamp duty on your purchase. That represents a saving of up to $14,440. Between $430,100 and $530,000, there is a reduced amount of stamp duty to be paid, with full stamp duty payable on purchases above $530,000. To be entitled to this exemption or concession, you need to have confirmation that your FHOG has been applied for and approved.