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Buying Your First Home During COVID-19

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Here’s why COVID offers you an excellent opportunity to buy your first home if you are financially secure.
 
Despite the decline in real estate listings, there’s been a spike in first home buyer inquires across the country as per a recent Realestate.com.au study. NSW witnessed a year-on-year growth of 39%. The corresponding figures for Queensland, WA, NT and ACT were 33%, 49%, 64% and 91% respectively. Here’s why COVID offers you an excellent opportunity to buy your first home if you are financially secure.
 
First Home Buyer Scheme: 
 
At the beginning of this year, the government introduced the first home buyer scheme. Under this scheme, a first home buyer can procure a property with a deposit as low as 5%. For mortgages with a deposit of less than 20% of the property cost lenders opt for LMI (Lender Mortgage Insurance) to protect themselves from defaults. The cost of LMI is passed to the borrower leading to an increase in the mortgage repayment. In the First home buyer scheme, the federal government bears the cost of the LMI allowing first home buyers the chance to get on to the property ladder with a lower deposit amount at the approximate cost of a regular mortgage.
 
Low-interest rates: 
 
The highest mortgage interest rate in Australia was 17% from June 1989 to April 1990. Current rates are nearly one-eighth of this. The RBA has slashed rates twice, and they are at the lowest level in our history, offering a fantastic opportunity for anyone who is looking to purchase a property through a mortgage.
 
First Homebuyer caution: 
 
First home buyers are very cautious. It is after all one of the most significant milestones of your adult life. Current circumstances allow you the time and space for the necessary due diligence and checks. Buyers may be more understanding along with involved real estate agents who are likely to go out of their way to satisfy all your asks.
 
Lender risk aversion: 
 
If you are financially secure, lenders are likely to favour you over other borrowers who may be self-employed or working in high-risk industries like hospitality, tourism, air travel and retail among others.
 
Fewer Buyers: 
 
With a lot of buyers postponing or cancelling their purchase altogether, you may be facing a lot less competition in scooping your dream home.
 
Bargaining Capabilities: 
 
In addition to fewer buyers, a lot of sellers may be looking at a sale for financial respite. Interacting with such motivated sellers could put you in an extremely favourable negotiating position.
 

Take the first step

If you are all set to make the best of current circumstances and are all set to buy your first home, there are few things you should consider

  • Be prepared for increased lender scrutiny. With the tightening of norms, lenders are looking at income stability and living expenses very closely. Be mindful of your credit card and online spending during COVID. This could negatively impact your chances of securing a mortgage.
  • Apply for pre-approval: Don’t let your dream deal slip away on account of delayed mortgage approval. Lenders are taking longer than usual to approve a mortgage in the wake of current circumstances. To expedite your overall purchase process and improve your negotiation capabilities it’s best to opt for a pre-approval that is valid for 3 -6 months
  • Choose a mortgage solution that matches your specific circumstances: Would you need an offset account? Is your mortgage rate the most competitive? Should you keep a part of your loan fixed and the rest variable?

Navigating the complexities of the mortgage industry as a first home buyer can get overwhelming. Rely on us to scope the market and identify the best fit to achieve your property ownership aspirations.

 

Feature Articles

Mortgage Brokers Versus Direct Lenders Some tangible benefits offered by a mortgage Broker that could make your property ownership journey a lot quicker and smoother.

All You Need to Know About the HomeBuilder Grant Here's a quick guide on the HomeBuilder Grant.

COVID Mortgage Holiday Extension Ready Reckoner All you need to know about the 4-month extension on the COVID Mortgage Holiday

EOFY Tax Filing Tips for Mortgage Seekers Practical and easy tax tips for mortgage seekers.

State First Homeowner Schemes Explained Access this list for state level first home buyer schemes

The First Home Super Saver Scheme Explained Access this quick guide on how to use the First Home Super Saver Scheme to accumulate a loan deposit faster.

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