First home buyers with 5% genuine savings buying north of Melbourne
Our first case is that of first home buyers purchasing a block of land and building a two-story home. They have saved $10,000 in the last three months. They saw this opportunity to purchase close to their place of work in Kilmore, a suburb 60 kilometres north of Melbourne.
The land they found was worth $200,000. The $10,000 was enough as a 5% deposit for the $200,000 purchase. First home buyers should also be aware that even if they are qualified for the stamp duty exemption, they have to pay the stamp duty at the time the land settles. The stamp duty that they paid gets refunded once the house is built.
In this scenario, our first home buyers need to save an additional $6,370 to cover stamp duty. Fortunately, they are actively saving through a uniquely Filipino money saving scheme called “paluwagan”. They expect to receive $6,000. They can easily save the $370.
With the $16,370, they are able to get an approval from the lender and settled on the land.
To build a two-story home at around $250,000, they need another $12,500 in savings sitting in their account for at least three months to establish genuine savings.
In the next 3 months, they receive a tax refund of $10,000 and manage to save the additional $2,500. With the $12,500, a construction loan for $237,500 was applied with the same lender. In the next eight months when their house completes, our first home buyers get the stamp duty of $6,370 back and because Kilmore is a regional suburb, they also get the $20,000 first home owners grant.
First home buyers with 5% non-genuine savings and renting
Our 2nd first home buyers in Melbourne received an inheritance of $30,000 from a grandmother in Queensland. They don’t have any savings at all and were so happy to receive the inheritance (although sad to lose their granny) and would like to use the money to invest in a home. They’ve been renting for years and found it difficult to save money.
They wanted to purchase a five-year-old townhouse in Point Cook for $600,000. With the 5% deposit of $30,000, they wanted to borrow the 95% of the purchase price.
Because clients are first home buyers, they qualify for the stamp duty exemption. But because they are purchasing an established home, they no longer qualify for the $10,000 grant.
After further assessment of their income, we are able to find a lender that will lend them the 95%. They didn’t have to wait for three months. The lender happily accepted the rental statement provided by their property manager as proof of genuine savings.
First home buyers with no deposit at all and parents happy to help
Our third case is that of first home buyers who are both on a good income. They’re a young couple who loves to spend money on their travels and on food and shopping. They’re now in their 30s and realised that despite their high income, they have not managed to save.
Their parents who keep on nagging them to buy a home are more than happy to help them with a deposit. Parents are both working and have an unencumbered property.
In this scenario, a family guarantee is the best strategy. What is important is that the kids’ salary can show that they are able to afford the repayment of the full 100% of the purchase price. With the parents’ property securing the 20% of the purchase of the kids, loan mortgage insurance was avoided.
You may be wondering how the kids will pay the 20% of the loan secured by the parents’ property?
When the kids’ property increases in value in three to five years’ time, the equity built can be borrowed for the purpose of paying out the 20% of the loan. When this happens, the parents’ property can then be removed as a security of the loan.
This article provides general information only and has been prepared without taking into account your objectives, financial situation or needs. We recommend that you consider whether it is appropriate for your circumstances and your full financial situation will need to be reviewed prior to acceptance of any offer or product. It does not constitute legal, tax or financial advice and you should always seek professional advice in relation to your individual circumstances.
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