Yahoo Finance Young Aussie’s $110,000 win after dodging common hurdle: 'First in my family'
Jasmine Brennan bought her first home last year with a 5 per cent deposit.
A young Aussie has revealed how she avoided paying a huge deposit to buy her first home and is now reaping the benefits. Rising property prices have pushed up the amount home buyer hopefuls need to save up for a deposit, adding tens of thousands of dollars to savings goals.
Melbourne resident Jasmine Brennan bought her first home in September last year. She told Yahoo Finance she was able to purchase the two-bedroom, two-bathroom Sydenham apartment with a small deposit using the First Home Guarantee scheme.
“I used the scheme which meant that I paid the 5 per cent deposit and I didn’t have to pay for LMI, which is lenders mortgage insurance,” she said.
“It made the out-of-pocket expense really, really low. I bought [the apartment] for $340,000 and I only had to put down $21,000 from my savings.”
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The mortgage broker said she was the first person in her immediate family to purchase a property. She said buying a home initially “felt impossible”.
“It felt so not known and I couldn't turn to my parents and ask what to do,” she said.
Brennan said she has been working full-time since she was 17, along with picking up odd jobs like babysitting or pet sitting, and was able to save by living with her parents.
“I was basically able to save 50 per cent of my income. My parents charged my rent but it was very cheap so I was able to just save every little bit I could,” she said.
Brennan said she was glad she bought a cheaper property and got into the market when she did.
“I’ve been really lucky. My apartment has gone up $110,000 in under a year,” she said.
Are you a first-home buyer with a story to share? Contact tamika.seeto@yahooinc.com
First-home buyers told to get in quick
Trusted Finance founder and director Robbo Roper said Aussies who want to take advantage of the First Home Guarantee Scheme should get in quick, with 35,000 spots released for the current financial year.
The scheme allows home buyers to buy with a 5 per cent deposit, rather than the bigger 20 per cent normally required to avoid expensive LMI.
“The earlier you can try to get into the housing market when these 35,000 spots are released, there’s a larger range of banks that you can choose from to maximise your borrowing power and your lending experience,” Roper told Yahoo Finance.
“The longer you wait, even though there might be spots left, it might not end up working out for you because you might not get approved with the only banks that are left with spots.”
The available spots are distributed to participating banks, including Commonwealth Bank, NAB, Westpac and non-major lenders.
Singles need to earn $125,000 or less per year to be eligible for the scheme, while joint applicants have a cut-off of $200,000 or less.
Property price caps apply and vary depending on where the property is located. For example, in Victoria there is a $800,000 cap in Melbourne and regional centres and a $650,000 cap for the rest of the state.
‘Explore’ your options now
Resolve Finance managing director Don Crellin encouraged first-home buyers to “explore all available options” as property prices continue to balloon.
National home prices grew to a fresh peak in July, PropTrack data found, increasing 6.28 per cent over the past year. The average Sydney home is now north of $1.1 million, Melbourne is sitting at $803,000 and Brisbane even higher at $853,000.
“For some buyers this might mean buying an investment property to get a foot on the property ladder,” Crellin said.
“In cities like Perth, buyers might find it challenging to enter the property market with $435,000.
"Shopping around for home loan rates and leveraging government incentives can make a significant difference.”
Resolve Finance research found buyers were making compromises to get onto the property ladder sooner rather than later, with 63 per cent considering purchasing a smaller home and 46 per cent open to moving further away from their work or education.
Brennan said she had initially hoped to buy a house but decided to shift her goal because she wanted to have money for travel.
She acknowledged her apartment won’t be her “forever home” but said it was a “stepping stone” towards her future dreams.
Should buyers get in now or wait for interest rate drops?
Rethink Investing managing director Scott O’Neill said it could be a “significantly better move” for buyers to purchase now before a potential interest rate drop.
“Acting before a positive economic event positions you ahead of those who move later, allowing you to benefit more from the growth cycle,” he told Yahoo Finance.
“Once the interest rate drops, there will be an influx of investors entering the market, increasing demand.
“Additionally, as rates decrease, property owners tend to raise their asking prices, creating upward pressure on property values. Therefore, acting sooner rather than later is advisable to maximise your benefits.”
The downside is you’ll have to deal with high interest rates on a home loan right now.
Brennan said high interest rates meant she has had to change her spending habits, including reducing eating out and going out with friends.
“You have to knuckle down and I have changed a lot of habits,” she said. “You do have to pick your battles and try not to spend money outside of the house.”
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