How first home buyers can buy up to five years sooner
As home prices climb higher, first home buyers can feel like the goal posts are continually shifting further out of reach. But there is a way to potentially cut years off the time taken to buy a home.
Saving a first home deposit has never been easy – especially in the last decade or two.
And as property prices continue to head north, first home buyers can be left wondering if they’ll ever be able to save a 20% deposit.
But don’t give up on your dream of home ownership just yet.
We can help you explore opportunities that could get you into the market before prices potentially rise further.
A new report by Domain examines a potential solution that could bring your purchase forward by more than five years.
Home price growth is pushing out deposit timeframes
The past year has seen home values across the nation’s capitals rise by 9.9%, according to Cotality.
However, even this eye-watering increase doesn’t show the full picture.
According to Domain, in some places, the price of entry-level homes has climbed over 20% in the past 12 months – a rise it describes as “an extreme rate of price growth”.
Faced with this level of price rises, saving a deposit can be a real pain point for plenty of first home buyers.
Domain found the time taken to save a 20% deposit now ranges from 2 years and 7 months for an entry-priced unit in Darwin, to 7 years and 7 months for an entry-priced house in Sydney.
But here’s the catch.
While you’re working hard to grow a deposit, home prices are likely to keep rising.
Over the past five years, for example, Domain says the price of entry level homes has risen 68%.
Get started in the market up to 5 years earlier
The federal government’s 5% Deposit Scheme may be the solution that could help you bring forward your home buying plans.
The scheme lowers the minimum deposit needed to buy a home down to 5%, or even 2% for single parents – without the need to pay lenders mortgage insurance.
Eligible home buyers do face property price limits.
However, there are no caps on personal income, and no limit on the number of people who can apply for the 5% Deposit Scheme each year.
Domain crunched the numbers, finding that the 5% Deposit Scheme can help first home buyers looking to buy a house in Sydney get into the market 5 years and seven months earlier.
In Brisbane and Adelaide, the scheme can cut more than four years off the time taken to save a deposit.
In every other capital, the 5% Deposit Scheme can bring forward buying plans by more than three years.
Is there a downside?
Saving a deposit is just one of the home buying requirements.
Lenders also want to be sure you can comfortably manage repaying your loan.
A potential drawback of buying with a small deposit is that you’ll likely need to borrow more, and this may mean higher loan repayments.
That’s why we encourage you to speak with us at an early stage for a clear idea of the likely repayments to budget for.
Talk to us
Not surprisingly, the 5% Deposit Scheme is proving very popular, having already helped more than 240,000 Australians into home ownership.
Contact us to see if it could be the solution that helps you bring forward your home-buying plans.
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