Are you ready to buy your first home?
My article for the Western Weekender
Getting a deposit together & buying your first home.
Gone are the days when we didn’t need any deposit at all to buy our first home, and with rents rising it’s a tough game to get this together. On top of the deposit you also need to allow for stamp duty and legal fees, together they come to nearly 10% of the property value as a minimum.
What are some of the other options we might not have considered?
Genuine savings are best
Ideally all lenders are looking at a regular savings history - this shows both your ability to meet a commitment and a good attitude towards money. A savings history needs to be demonstrated over at least a 3 month period. Aim for a minimum of 5% of the purchase price as genuine savings, if you can come up with the other costs by other means.
TIP Ideally these savings should be in a separate account for ease for the lender, smaller regular deposits beats larger irregular deposits.
Sale of assets & you’re paying rent
Some lenders can also consider you proving your ability to meet the commitment in other ways; if you have the money via sale of an asset you’ve held for a while or from additional repayments on a personal loan, or perhaps a gift & we could show your regular commitments via a solid rental payment history (in the exact same name as the applicants) over 12 months, then we could be in business.
Help from parents via a gift
If you have generous parents & they’re willing to help you beat the price growth, consider taking their assistance. This needs to be 10% or more plus enough to cover your costs, or the lenders are going to want you to show your ability to save as per the above.
Or via a limited guarantee
MASSIVELY popular right now! Most parents really want to help their kids get started but often don’t have the cash. If they do have equity then your parents could offer their property for a “limited guarantee”, usually up to 25% of the value of your home, which is secured against their home and avoids you having to get any money together at all – or you can reduce the guarantee by including your savings.