First Home Buyers Guide

06 Jan

First Home Buyers Guide

Before you buy your first home, here are some essential facts you need to know.

1. You will need a deposit

If you have started saving you can start to look at buying once you have at least 5% of the purchase price.

Lenders Mortgage Insurance (LMI)

If you have between 5% and 20% of the purchase price, you may need to pay what’s called Lenders Mortgage Insurancee, which enables banks to lend you a larger percentage of the purchase price. This can be included either in your upfront costs or in your loan repayments so that it’s spread out over the term of the loan.

If you have a deposit of over 20%, you can avoid the extra costs of 
Lenders Mortgage Insurance.

2. What if I don’t have a deposit?

If you don’t have a deposit, there are a number of options that can help you get your home sooner such as:

Parental Guarantee

You may be able to use a Parental Guarantee where your parents use available equity (supported by a mortgage over their property, or a term deposit) to assist you with your home purchase.

3. You can receive up to $20,000 with the FHOG

If you are buying or building a new home valued up to $750,000, you may be eligible for a First Home Owner Grant (FHOG). If you are eligible for the FHOG and the home you are buying is in regional Victoria, you will receive $20,000. If the home is not in regional Victoria, the grant is $10,000. 

Established homes

Established homes are no longer eligible to receive the FHOG. However, if you are buying an established home as your first home and you meet the FHOG eligibility criteria (but for the fact that it is not a new home), you may be entitled to a first-home buyer duty exemption (for homes valued at $600,000 or less) or concession (for homes valued at $600,001 up to $750,000) where the contract is entered into on or after 1 July 2017.

For contracts signed prior to 1 July 2013, a FHOG of up to $7000 is still available for eligible applicants if you bought an established home.

4. You pay stamp duty on your purchase

When you buy your home, you’ll most likely have to pay land transfer duty (otherwise known as stamp duty). How much you pay depends on your property’s value, what you’re using it for, if you are a foreign purchaser, and whether you are eligible for any exemptions or concessions.

Exemptions and concessions

You may be eligible for – and receive – more than one exemption, concession or reduction from stamp duty for your property. In Victoria, these include:

  • First-home buyer duty exemption or concession – a one-off duty exemption for a PPR valued up to $600,000, or a concession for a PPR with a dutiable value from $600,001 to $750,000
  • Pensioner concession – a one-off duty exemption or concession for a new or established home valued up to $750,000