At Keypoint we specialise in assisting first home buyers to find a home loan solution that meets their needs.
With so many different lenders, loan options and borrowing rules and constraints, it’s not surprising that first home buyers find it difficult to get through the home loan maze. Add to this the fact that most state and government stamp duty relief and first home owner grants are only available for land and construction or the purchase of new homes and buying a home gets more challenging.
Our experience with first home buyers and construction lending makes us a valuable partner in choosing a finance solution.
Our aim is to ensure you:
– Understand the entire home buying or building journey,
– Know what you need to do to attain finance approval, and
– Find the most appropriate loan and lender to meet your needs.
The two key concerns for most of our first home clients is the amount of deposit they need and how much they can afford to borrow.
Most lenders, through lender’s mortgage insurance (LMI), will lend up to 95% of the value of the property you are purchasing. Therefore, in the first instance, first home buyers should aim to save at least 5% of the expected purchase price of the home. Many of the lenders require this to be genuine savings.
Although 5% is the minimum deposit you need in order to obtain financing, we recommend you save a little more to cover other costs, such as lender’s mortgage insurance shortfall (if applicable), legal fees, government charges and lender application fees (if applicable). This may be at least another 2% of the purchase price.
If you’re buying an existing property or don’t qualify for stamp duty relief or the first home buyers grant, then you will also need to ensure that you have enough funds to cover the stamp duty. In NSW, for instance, for a home purchased at $400,000 this is an additional $13,490 that you will need (subject to change).
Your borrowing power
How much you can borrow depends primarily on your income(s), current debt repayments and living expenses? Primarily, the emphasis is to determine how much residual income you have to pay off the repayments on the loan you are applying for. Lenders will add a buffer to the current rates to ensure that you can still make your repayments if interest rates rise. It is important to also consider any perceived changes in your lifestyle or work arrangements that may impact your ability to make future repayments. For instance, planning a family or ceasing regular overtime income.
When assessing a loan, lenders can look beyond the above financial metrics to decide if your loan is to be approved. The 5C’s of lending in our knowledge section will provide you with a good insight into what is considered when assessing a loan.
If you want to discuss how much you can borrow please contact us for a free no obligation consultation.
Building your first home
Most state governments, including New South Wales, now offer stamp duty concessions and first home owner grants only on new homes or land and construction with limits on purchase and construction values. There are general criteria you will also need to meet to ensure you qualify for these concessions and grants.
Buying land and constructing your home can be a complex undertaking. In certain cases this will include having two separate loans (one for land and the other for the construction), ensuring valuations on both the land and construction are acceptable, and managing your cash flow with repayments on your land and increasing repayments on your construction loan with each draw down.
Keypoint Financial Services has been actively involved in the land and construction market. Contact us to assist you further with your construction financing.