Why first home buyers are closer to the finish line than they think: An interview with Suzy McDonald, Yellow Brick Road Milton
It's hard out there for a house hunter. Mortgage Choice's First Home Buyer survey revealed that nationwide, 37 per cent of respondents weren't able to buy in the area they wanted to. Out of those people, a vast majority (85.2 per cent) said the reason was that the homes were out of their price range.
Given the recent increases in property values, you can't blame them for feeling this way. But, as Suzy McDonald from Yellow Brick Road Milton points out, there are a lot of leg-ups that FHBs don't necessarily know about.
What they think they need and what they actually need are two different things."
"A lot of first home buyers come to us and think they can't do it, that their purchase is a long way off. But in a lot of cases, what they think they need and what they actually need are two different things."
Keeping it genuine
Suzy says that one of the first steps for securing a home loan is showing you can put together genuine savings - usually 5 per cent of a home's value, put together over a period of three months or so. However, CoreLogic RP Data recorded the median Brisbane value at more than $525,000 at the end of September - so even 5 per cent is a significant amount.
Lenders Mortgage Insurance (LMI) is an extra expense you can save on by having a Loan to Value ratio of less than 80%. So if you make a deposit of 20% or more you will be able to save on LMI.
"What many people don't realise is that they can build up this 5 per cent of genuine savings just by saving and paying the rent," she adds.
"It usually has to be through a property agent that can vouch for you, and you must be the only person on that lease. But it does count as a demonstration of genuine savings towards your first home."
This process can take six months or even a year, but offers a pathway to first home ownership that many people aren't aware of.
Use your lump sums
In addition to building a genuine savings deposit, Suzy says many first home buyers forget about lump sums of money that can be added into the deposit pool.
"Work bonuses, tax cheques, that sort of thing - they can all go a long way towards a first home deposit, but will often be overlooked."
The Australian Securities and Investments Commission reports that the average tax return for an individual in 2014-2015 was $2,112 - not a bad amount of money to have in your pocket! But if you're saving for a first home loan deposit, remember Suzy's advice - it could make all the difference for your prospects.
"Stamp duty concessions and first home buyer grants are ones that a lot of people don't understand, but they can save them so much money as a first home buyer," Suzy says.
Is your first home closer than you think?
For anyone buying after July 2016 in Queensland, that grant can come to a total of $20,000 - for those that entered contracts before this, it will still be $15,000. It also only applies to homes worth less than $750,000 - which Suzy doesn't think will be a problem.
"Most people we deal with, and most homes in our area, come in at around or just under $500,000 - that's our first home buyer range usually."
On top of this, there are duty concessions for people buying vacant land, and even specific strategies if you buy an apartment off-the-plan. With a little research and the right financial advice, first home buyers can get a significant leg-up.
Covered your bases?
"Percentage-wise, I'd say maybe a quarter of the people I talk to are first home buyers," Suzy adds.
"It's always worth coming in. We just work with so many lenders that we're sure to find a home loan that is serviceable, even for first home buyers that didn't previously think they could buy."
The lesson is clear - even if you're in doubt, you might actually be in range for buying your first home already.