First home buyers turn to Bank of Nan and Pop

Nan and Pop have always been good for birthday money, but one-in-10 grandparents are taking their generosity to the next level: helping their grandkids buy a first home.

Most of us have special memories of pocketing a few treats from Granny and Gramps.

But it turns out those small gestures of affection we knew as kids are morphing into something far more valuable than a few sneaky lollies before dinner or a surprise Lego set.

Research by Compare the Market shows almost three-quarters of Aussie grandparents are giving their families a financial helping hand.

Around 13% are lending money, 9% are chipping in with household bills, and one-in-10 are helping their grandkids buy a first home.

It goes to show that we’re never too old for grandparents’ treats.

But if your Gramps and Granny are keen to help you get started in the property market, it’s important to have some open conversations first.

How grandparents can help

It’s not unusual for first home buyers to need support from family – especially in this day and age – and it can come in a variety of ways.

One option is for a close relative to act as a guarantor for a first home buyer’s loan.

It’s a big ask for grandparents though.

If the borrower can’t keep up the loan repayments, a lender can ask the guarantor to pay off the debt – something that could leave Nan and Pop financially skewered.

If they can afford it, another way for grandparents to help their grandkids buy a home is by gifting money.

What to be aware of

A cash gift doesn’t have to be huge to make a difference.

It can help grow a deposit or go towards upfront buying costs such as lenders’ mortgage insurance.

However, there are traps to be aware of.

You could get a ‘please explain’ from a lender when they see a lump sum of cash land in your bank account.

The bank may want to be sure it’s not a loan that grandma and grandpa expect to be repaid.

So, it can be a good idea for grandparents to write a letter spelling out that they are gifting the money unconditionally with no strings attached.

And while this should go without saying, it would be negligent of us not to stress the importance of nan and/or pop being completely sound of mind when gifting any money.

The last thing you’d want to do is leave them short in funding their retirement, or start a rift (or legal battle) with other family members who love and care for them as much as you.

Talk to us to find out how family can help

Buying a first home is a special milestone, and it’s extra special when family members rally around to lend a hand.

But as we’ve outlined today, it’s not without its potential pitfalls.

So call us today to find out the different ways your family might be able to help you buy a place of your own.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

What you should know before buying ‘subject to finance’

Not sure if you’ll get the thumbs up for a home loan? But you really, really like that house that just popped up? Making an offer ‘subject to finance’ could be the right move. Here’s how it works.

Picture this. You’ve seen a home you’re crazy about, and you don’t want to miss out to another buyer. So, you sign on the dotted line and hand over your deposit.

Things are getting real now. But what if they’re not? What if you struggle to land a home loan?

It’s a scenario every home buyer dreads.

If you have to back out of the contract because you can’t get loan approval, you could lose your deposit.

One possible solution, however, is to make your offer ‘subject to finance’.

Why make an offer subject to finance?

In practical terms, making an offer subject to finance means an extra clause is added to the sale contract.

Essentially, it can allow the buyer to walk away from a sale with their deposit intact if mortgage finance can’t be arranged within a set timeframe.

Understandably, the seller won’t wait around forever. So, the time allowed to secure loan approval can be tight, often a matter of days.

However, a subject to finance clause could help you avoid a last minute race for finance – a pressure-cooker situation that could see you accept a loan or lender that’s not right for your needs.

The downside of buying subject to finance

There is a catch to making an offer subject to finance: the seller doesn’t have to agree to it.

In today’s property market, homes are selling fast – in as little as 10 days in some neighbourhoods.

With that sort of buyer demand, there may not be much incentive for a seller to agree to an offer that’s subject to finance.

Or, if you’re buying at auction, the sale is usually unconditional. Chances are you won’t have an opportunity to alter the sale contract.

These drawbacks highlight the value of speaking to us before you go home hunting.

Having your loan pre-approved, for example, can take away a lot of the uncertainty around securing finance.

Can I buy before I sell?

When you’re ready to climb the property ladder, another key question is often whether it’s better to sell first and buy later.

With money in the bag from the sale of your old home, you may be less concerned about making an offer subject to finance.

That said, if you see a place you want to buy before your home sells, a bridging loan could cover the funding gap.

The beauty of a bridging loan is that this type of finance usually requires interest-only payments, not principal and interest payments.

The downside is that the interest rate tends to be higher than for a traditional home loan.

Talk to us today

There’s a lot to plan for when you’re buying your next home.

Call us to streamline your purchase. From subject to finance offers to bridging loans, upgrading can be a lot less stressful when you know the options.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

Not feeling the budget love? 4 ways you could still get ahead

If the latest federal government budget is leaving you hungry for perks and savings, you’re not alone. We’ve had a brainstorm and here are four ways you could start working towards your property goals now.

The 2024 federal budget is out, and you might be wondering what’s in it for you.

Sure, an energy rebate of $300 annually can help take the sting out of electricity bills, though at $75 per quarterly bill, it’s not a huge saving.

But you don’t need to rely on the federal budget.

Here are four strategies that could get your wealth growing.

1. Helping hands for first home buyers? There’s plenty available

Disappointed that the federal budget didn’t offer more support for first home buyers?

There is still a wide choice of home buying assistance schemes to pick from.

Take a look at:

– The Home Guarantee Scheme that lets eligible first home buyers, regional Australians, and single parents buy a place of their own with a low deposit (between 5% and 2%) and zero lenders mortgage insurance.

– The First Home Owner Grant, which is usually worth $10,000 but can be up to $30,000 (depending on your state) when you buy or build a new home.

Don’t forget stamp duty concessions (in most states) and the First Home Super Saver Scheme that can let first home buyers use their super to grow a deposit.

Not sure what you’re eligible for?

Talk to us to find out which first home buyer schemes you can tap into.

2. Rate relief for home owners? Make it happen sooner

Why wait for the Reserve Bank of Australia to cut rates?

You may be able to pocket rate savings of your own.

Lots of savvy home owners are jumping ship, with around $16.02 billion worth of home loans refinanced in March 2024.

It goes to show that savings can still be up for grabs for borrowers who switch to a lower rate home loan.

Call us today to find out how your loan shapes up, and discover how much you could save by switching.

3. Property investors: harness your property’s equity

Lending to property investors has jumped 31% in the past year.

It’s being driven by an 11% rise in property values since January 2023 – a jump that’s seen home owners notch up thousands of extra dollars in home equity.

The good news is that this home equity could potentially be used in place of a cash deposit to invest in an investment property.

Talk to us today about unlocking your home equity and becoming a property investor.

4. Tax relief: Stage 3 tax cuts are on the way

The federal budget has confirmed that 13.6 million Australians will pocket tax savings from 1 July.

And there’s a good chance you’re among them.

The Stage 3 tax cuts are expected to deliver an average tax saving of $1,888 a year, or about $36 weekly.

On the face of it, that’s not a game changer when it comes to your weekly budget, but it can help you in more ways than one.

That’s because it can also boost your borrowing power if you’re buying a first home, upgrading to your next home, or planning to invest.

RateCity has crunched the numbers, finding that for a single person on an income of $100,000, the Stage 3 tax cuts could add an extra $21,000 to their borrowing power.

A couple with a combined annual income of $150,000 could see their borrowing capacity jump by almost $30,000.

Call us to know more

If the federal budget has left you hankering for more, it’s time to take matters into your own hands.

Whether you’re a first home buyer, home owner looking to save on your home loan, or property investor looking to grow your wealth, call us today for insights into how you can take the next step in your property journey.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

Low deposit scheme helps over 150,000 families buy sooner

Whether you’re rat running your local streets, or have a knack for always picking the fast-moving supermarket queue – everyone loves a good time-saving hack. Well, today we’ll let you in on a scheme that could get you into your first home years – yep years – sooner!

When you’re saving for a first home, growing a 20% deposit can be a tough challenge.

It’s certainly not made any easier by national property values soaring higher each month and cost of living challenges.

But there is one potential solution that has seen 156,000 first home buyers, single parents and regional Australians buy or build a home of their own over the past four years – it’s the federal government’s Home Guarantee Scheme (HGS).

How to buy with just a 5% deposit

The HGS helps eligible first home buyers and single parents buy a home sooner by requiring only a small deposit.

The scheme has three different parts.

First home buyers can take advantage of the First Home Guarantee, or the Regional First Home Buyer Guarantee if they live outside a major city, while the Family Home Guarantee is pitched at single parents buying a home.

The common thread is that the scheme lets eligible buyers get started on the property ladder with a smaller deposit – and no need to pay lenders mortgage insurance (LMI).

First home buyers may need as little as a 5% deposit, while solo parents can buy with just a 2% deposit.

The HGS doesn’t provide a cash payment or a deposit for a home loan.

Instead, the Federal Government guarantees the loan, which is the key to buying with a small deposit while avoiding LMI.

A head start on the property ladder

The big plus of the HGS is that it gives buyers a head start in the property market.

According to Domain’s latest First Home Buyer Report, it can take over six years to save a 20% deposit on an entry level home, depending on where you buy.

The catch is that by the time you’ve saved that sort of deposit, home prices may have soared higher, pushing the goal posts further out of reach.

However, the beauty of the HGS is that it lets first home buyers jump into the property market about four years earlier (on average) than they normally would.

Not all lenders are part of the HGS

The HGS does have eligibility requirements, including income thresholds and property price caps that differ by state.

Give us a call, and we can explain whether or not you’re eligible.

The other thing to be aware of is that not all banks have signed up to the HGS.

That’s why it’s so important to speak to us at an early stage.

We can save you plenty of time, by explaining which lenders offer low deposit/no LMI home loans under the HGS, and put forward to you loans and lenders that suit your needs.

Don’t delay, places are limited

The HGS is only available to a limited number of home buyers each financial year.

And not surprisingly, places tend to fill fast.

So if you’d like to find out more about using the scheme in the rapidly approaching new financial year – and whether you might be eligible to buy with just a 5% deposit and zero LMI – get in touch today.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

Here’s why your borrowing power might soon get a lift

Who doesn’t love a tax cut? Most of us are now only weeks away from saving on our tax bills, with Stage 3 tax cuts to kick in from 1 July. But another key advantage is that the tax cuts could give your borrowing power a nice boost.

The upcoming Stage 3 tax cuts have received plenty of attention – some good, some bad – so we won’t focus on the politics of it today.

But they are still expected to benefit about 13.6 million Australians, and how much tax you might save depends on your income.

A person on the national average wage of around $73,000 will pocket a yearly tax saving of $1,504, says the federal government.

If your income is, say, $100,000, you could expect to save $2,179 in tax each year.

For households juggling a cost-of-living crunch, the tax cuts can’t come soon enough.

But if you’re in the market for a new home, the tax cuts may offer an unexpected sweetener: a handy boost to your borrowing power.

What is ‘borrowing power’?

Your borrowing power, or borrowing capacity, refers to the amount a lender is willing to lend to you.

It’s based on several factors including the size of your deposit, your household expenses, and your after-tax income (or take-home pay).

The higher your after-tax income, the more you may be able to borrow.

That could mean being able to buy a home sooner, or buying a more expensive property.

How the tax cuts might affect your borrowing power

RateCity has crunched the numbers, finding that for a single person on an income of $100,000, the Stage 3 tax cuts could add an extra $21,000 to their borrowing power.

A couple with a combined annual income of $150,000 could see their borrowing capacity jump by almost $30,000.

It makes the upcoming tax cuts great news if you’re in the market for a first home, or if you’re upgrading to your next place.

Even if you don’t plan to borrow more, the increase to your take-home pay may make your current home loan repayments more manageable.

Other ways to boost your borrowing power

You may not need to wait for the Stage 3 tax cuts.

It is possible to increase your borrowing capacity in other ways, including:

1. Trim spending

Cutting back on non-essential expenses could free up extra cash to grow your deposit.

As household expenses are a factor many lenders look at when determining loan eligibility, trimming back regular costs could add to your borrowing power.

2. Cut back your credit card limit

When you apply for a home loan, lenders will look at the maximum limit on your credit card – not the outstanding balance.

That’s because you could max out the card just after buying a home, leaving less cash to manage mortgage repayments.

Contacting your card issuer to request a lower credit limit – or cancelling it altogether once paid off – could raise your borrowing power.

3. Increase income

Sure, it’s easier said than done.

But if you can take on extra shifts for a few months, convince the boss you deserve a pay rise, or start a side hustle, your bank balance – and borrowing power – could both benefit.

Find out how much you could borrow

Yes, there are online calculators that roughly estimate your borrowing power.

The catch is that these don’t take into account the different criteria applied by each lender. And they don’t know you, your expenses and your goals.

That’s why it’s important to talk to us to get a more accurate picture of your borrowing power.

We can get to know you, your expenses, and the kind of property you have your eyes set on, and then help you come up with a plan to try and make it happen.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.