Given the state of the Sydney property market at present, many frustrated home-seekers are left feeling as though buying your own home seems continuously out of reach at present.
Even though you may have been saving hard to build a deposit for a number of months or years, reaching that 20% requirement will prove challenging for even the strictest of savers, as the rising prices continue to push your deposit amount higher and higher.
Whilst 20% is still regarded as the ideal amount for a deposit, thankfully many lenders will now let you borrow up to 95% of your home’s value. This means that you only need to provide a 5% deposit, so purchasing a home valued at $600,000 means fronting a $30,000 deposit as opposed to $120,000.
Having a smaller deposit however, will mean adding lenders mortgage insurance to your loan (applicable if you intend to borrow more than 80% of your property’s value). Whilst LMI will increase your repayments, it means that borrowers who are keen to purchase, and wish to avoid chasing a rising market need only save the minimum deposit.
On the flip side, if you are happy to continue saving in order to reach your 20% target, a larger deposit is very rewarding. The bigger your deposit, the lower the LMI and the smaller your loan will be (with lower repayments and greater equity available eventually).
Along with a decent deposit, many first home buyers have had assistance from family to get them across the line. Family members can act as guarantor for a home loan, which is another way to avoid LMI.
So if you are looking to enter the property market, but have dismissed the idea as impossible, please know that there ARE options available without needing to save a huge deposit.
As your mortgage broker, I strongly recommend getting some advice so that you know what your options are and how we can help you enter the property market sooner!