COVID-19 disrupts home ownership plans for first home buyers

COVID-19 disrupts home ownership plans for first home buyers

COVID-19 has thwarted the property purchase plans of many first home buyers, a new survey found.

More than two thirds of first home buyers believe the pandemic has forced them to push back or give up buying a home, according to a poll of 700 from Gateway Bank. The survey was conducted in late May.

Just over half of first home buyers have delayed their home ownership plans, while another 16 per cent have put their plans on ice “indefinitely”.

First home buyers spend their home deposit savings

The research also found that half of Australian first home buyers have resorted to raiding their property deposit savings – money they may have spent years building up – to get by during COVID-19. One in six have nearly wiped out their deposit savings in this period.

The most common reason for first home buyers to dip into their deposit savings was to pay for everyday expenses, with 45 per cent saying this was what they used their funds for. 

More than a third indicated they reallocating their deposit savings as their emergency fund, while 17 per cent accessed their funds to support a financially distressed family member. 

Others used their deposit savings for:

  • Stock market investments – 11 per cent
  • Term deposit/high interest account – 11 per cent
  • Travel – 10 per cent
  • Buying/upgrading a motor vehicle – 10 per cent
  • Upgrading rental accommodation – 6 per cent.

Nearly a quarter of first home buyers say they don’t intend to move their savings.

For the first home buyers who were forced to chip away at their deposit funds, it may take them longer to build up savings before their deposit is large enough to enter the housing market.

Almost 60 per cent estimate that they may need to save for an additional one to three years, while a quarter reckon they won’t be ready to put down a deposit for another three years.

Lexi Airey, Gateway Bank’s chief executive officer, said while many were accessing their home deposit savings during the pandemic, getting a foot on the property ladder is not completely out of reach.

“As more people are being forced to spend their deposit savings on basic living expenses, the prospect of buying a property is now even more elusive,” she said.

“However, the dream of home ownership remains alive for the vast majority of Australians, even if it is going to take longer to realise.”

One in five don’t know about government help for first home buyers

While savings timelines have been disrupted, the government has introduced various measures to help first home buyers get their foot on the property ladder. However, many were overlooking these schemes, the Gateway poll found.

More than one in five of those surveyed were unaware of any government financial assistance for first home buyers. 

Meanwhile, 44 per cent had not heard of the First Home Owner Grants, which is a one-off state-funded grant to eligible first home buyers.

As few as a third knew about the First Home Loan Deposit Scheme, where first home buyers with a deposit of as little as 5 per cent may take out a mortgage without paying lender’s mortgage insurance (LMI). 

About a quarter were aware of stamp duty concessions for first home buyers and the First Home Super Saver Scheme, which allows those who haven’t bought a property to save for a deposit within their superannuation fund.

Ms Airey said while some first home buyers are taking advantage of government financial assistance schemes, many were unaware of the help available to them.

“These schemes and other options such as LMI or a family guarantee are designed to help first home buyers purchase their property sooner,” she said.

“Awareness of these measures is generally quite low, and those looking to enter the property market for the first time could be missing out on an opportunity to put their pre-COVID home ownership plans back on track.”

Tips to help you save for a property deposit

1. Get on top of your debts

Debt can be a real financial burden, particularly when trying to come up with a sizeable deposit. While getting out debt can be tough, it’s not impossible. Consider focusing on your debt with the highest interest rate, as this is likely to be your most expensive debt. This may be your credit card debt, given that purchase rates can be as high as about 25 per cent on some cards. If you can smash a high-interest debt, you may well be on your way to a debt-free life. Another option is to consolidate your debts with a personal loan. This can help reduce the fees and interest you pay on multiple loans by rolling them into one personal loan, which some may also find to be more manageable. 

2. Consider government help

If you’re seriously looking to buy a property but don’t know about the government first home buyer’s assistance schemes available, doing some research into this won’t hurt. Getting your foot on the property ladder is hard enough as it is without a raging pandemic, so it makes sense for you to take advantage of whatever help is available for you. Government assistance measures may come in the form of cash grants, mortgage assistance or stamp duty concessions and exemptions. Make sure you read up on the assistance available in your state and each scheme’s criteria to see if you’re eligible. 

3. Open a term deposit account

While interest rates are on the decline, stashing your money away in a term deposit could be an option for those not wanting to risk their life savings on the stock market. Term deposits generally provide a fixed return on a set amount of money over a certain period. On the upside, you’ll know exactly how much you’ll earn over the term deposit period. However, it’s important to note that if you get in a situation where you need to access your term deposit funds, you’re likely to be charged a break fee from the bank. You may also miss out on some interest if you do take out your funds early. Make sure you weigh up the pros and cons of a term deposit before you sign up for one.

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Learn more about home loans

Can I get a NAB first home loan?

The First Home Loan Deposit Scheme of NAB helps first home buyers purchase a property sooner by reducing the upfront costs required. This scheme is offered based on a Government-backed initiative, with10,000 available places announced in October 2020.

Suppose your application for the NAB first home buyer loan is successful. In that case, you’ll only need to pay a low deposit, between 5 and 20 per cent of the property value and won’t be asked to pay lender's mortgage insurance (LMI). You’ll also receive a limited guarantee from the Australian government to purchase the property.

If you’re applying for the NAB first home buyer home loan as an individual, you need to have earned less than $125,000 in the last financial year. Couples applying for the NAB first home loan need to have earned less than $200,000 to be eligible. To be considered a couple, you need to be married or in a de facto relationship. A parent and child, siblings or friends are not considered a couple when applying for a NAB first home loan.

The NAB First Home Loan Deposit Scheme is currently offered only to purchase a brand new property, rather than an established property.

How much deposit do I need for a home loan from NAB?

The right deposit size to get a home loan with an Australian lender will depend on the lender’s eligibility criteria and the value of your property.

Generally, lenders look favourably on applicants who save up a 20 per cent deposit for their property This also means applicants do not have to pay Lenders Mortgage Insurance (LMI). However, you may still be able to obtain a mortgage with a 10 - 15 per cent deposit.  

Keep in mind that NAB is one of the participating lenders for the First Home Loan Deposit Scheme, which allows eligible borrowers to buy a property with as low as a 5 per cent deposit without paying the LMI. The Federal Government guarantees up to 15 per cent of the deposit to help first-timers to become homeowners.

Where can I get all the information about an ANZ first home buyer’s loan?

As a first home buyer, you may require help and hand-holding, and as such ANZ has the buying your first home section on its website full of important information. ANZ also has a form in this section you can fill out to get a free consultation from an ANZ First Home Coach and create your own plan for buying your first home. This coach will help you understand where your current income is being spent and plan for your home loan repayments. You’ll get a clear picture of the costs involved in purchasing a property and how to budget or save for these costs. The coach will help you understand different deposit options and manage your accounts to enhance your savings.

There are three types of ANZ first home loans - Standard Variable, Fixed, and Equity Manager. The features, interest rates, and terms for each are different, and you can compare them here.

When they apply for an ANZ home loan, first home buyers can also get guidance on applying for the First Home Owner Grant (FHOG). This is a one-off government grant that may be available to you when you’re buying your first home. The eligibility criteria for FHOG differs between the different states and territories, which is why it’s helpful to have expert advice when applying.

Can first home buyers apply for an ING home loan?

First home buyers can apply for an ING home loan, but first, they need to select the most suitable home loan product and calculate the initial deposit on their home loan. 

First-time buyers can also use ING’s online tool to estimate the amount they can borrow. ING offers home loan applicants a free property report to look up property value estimates. 

First home loan applicants struggling to understand the terms used may consider looking up ING’s first home buyer guide. Once the home buyer is ready to apply for the loan, they can complete an online application or call ING at 1800 100 258 during regular business hours.

What are the pros and cons of no-deposit home loans?

It’s no longer possible to get a no-deposit home loan in Australia. In some circumstances, you might be able to take out a mortgage with a 5 per cent deposit – but before you do so, it’s important to weigh up the pros and cons.

The big advantage of borrowing 95 per cent (also known as a 95 per cent home loan) is that you get to buy your property sooner. That may be particularly important if you plan to purchase in a rising market, where prices are increasing faster than you can accumulate savings.

But 95 per cent home loans also have disadvantages. First, the 95 per cent home loan market is relatively small, so you’ll have fewer options to choose from. Second, you’ll probably have to pay LMI (lender’s mortgage insurance). Third, you’ll probably be charged a higher interest rate. Fourth, the more you borrow, the more you’ll ultimately have to pay in interest. Fifth, if your property declines in value, your mortgage might end up being worth more than your home.

How can I apply for a first home buyers loan with Commonwealth Bank?

Getting a home loan requires planning and research. If you are considering a home loan with the Commonwealth Bank, you can find the information you need in the buying your first home section of the bank’s website.

You can see the steps you should take before applying for the loan and use the calculators to work out how much you can borrow, what your monthly repayments would be and the upfront costs you’d likely pay.

You can also book a time with a Commonwealth first home loan specialist by calling 13 2221.

CommBank publishes a property report that may help you understand the real estate market. The bank has also created a CommBank Property App that you can use to search for property.  The link to download this app is available on the same webpage.

If you are eligible for the First Home Loan Deposit Scheme, CommBank will help you process your application. The scheme helps first home buyers to purchase a home with a low deposit. You can read details about this scheme here and speak with a CommBank home lending specialist to understand your options.

How much deposit do I need for a home loan from ANZ?

Like other mortgage lenders, ANZ often prefers a home loan deposit of 20 per cent or more of the property value when you’re applying for a home loan. It may be possible to get a home loan with a smaller deposit of 10 per cent or even 5 per cent, but there are a few reasons to consider saving a larger deposit if possible:

  • A larger deposit tells a lender that you’re a great saver, which could help increase the chances of your home loan application getting approved.
  • The more money you pay as a deposit, the less you’ll have to borrow in your home loan. This could mean paying off your loan sooner, and being charged less total interest.
  • If your deposit is less than 20 per cent of the property value, you might incur additional costs, such as Lenders Mortgage Insurance (LMI).

Does Australia have no-deposit home loans?

Australia no longer has no-deposit home loans – or 100 per cent home loans as they’re also known – because they’re regarded as too risky.

However, some lenders allow some borrowers to take out mortgages with a 5 per cent deposit.

Another option is to source a deposit from elsewhere – either by using a parental guarantee or by drawing out equity from another property.

What are the features of home loans for expats from Westpac?

If you’re an Australian citizen living and working abroad, you can borrow to buy a property in Australia. With a Westpac non-resident home loan, you can borrow up to 80 per cent of the property value to purchase a property whilst living overseas. The minimum loan amount for these loans is $25,000, with a maximum loan term of 30 years.

The interest rates and other fees for Westpac non-resident home loans are the same as regular home loans offered to borrowers living in Australia. You’ll have to submit proof of income, six-month bank statements, an employment letter, and your last two payslips. You may also be required to submit a copy of your passport and visa that shows you’re allowed to live and work abroad.

What is a low-deposit home loan?

A low-deposit home loan is a mortgage where you need to borrow more than 80 per cent of the purchase price – in other words, your deposit is less than 20 per cent of the purchase price.

For example, if you want to buy a $500,000 property, you’ll need a low-deposit home loan if your deposit is less than $100,000 and therefore you need to borrow more than $400,000.

As a general rule, you’ll need to pay LMI (lender’s mortgage insurance) if you take out a low-deposit home loan. You can use this LMI calculator to estimate your LMI payment.

How do I apply for Westpac’s first home buyer loan?

If you’re a first home buyer looking to apply for a home loan with Westpac, they offer an online home loan application. They suggest the application can be completed in about 20 minutes. Based on the information you provide, Westpac will advise you the amount you can borrow and the costs associated with any possible home loan. 

You can use Westpac’s online mortgage calculators to estimate your borrowing power. You can also work out the time it might take to save up for the deposit, and the size of your home loan repayments

When applying for a home loan with Westpac, you’re assigned a home finance manager who can address your concerns and provide information. The manager will also offer guidance on any government grants you may be eligible for. 

How much deposit will I need to buy a house?

A deposit of 20 per cent or more is ideal as it’s typically the amount a lender sees as ‘safe’. Being a safe borrower is a good position to be in as you’ll have a range of lenders to pick from, with some likely to offer up a lower interest rate as a reward. Additionally, a deposit of over 20 per cent usually eliminates the need for lender’s mortgage insurance (LMI) which can add thousands to the cost of buying your home.

While you can get a loan with as little as 5 per cent deposit, it’s definitely not the most advisable way to enter the home loan market. Banks view people with low deposits as ‘high risk’ and often charge higher interest rates as a precaution. The smaller your deposit, the more you’ll also have to pay in LMI as it works on a sliding scale dependent on your deposit size.

How to apply for a pre-approval home loan from Bendigo Bank?

Applying for pre-approval on your home loan gives you confidence in your ability to secure finance while looking at potential new homes. You can get a free and personalised pre-approval home loan from Bendigo Bank in just a few minutes, without any credit checks or paperwork. 

Bendigo Bank offers pre-approval for home loans that allow you to understand the home loan size you may be able to get before looking for a new home. 

With the pre-approval, Bendigo Bank provides an estimate of your borrowing power. This figure incorporates stamp duty, lenders mortgage insurance (LMI) and any first home buyer incentives you may be eligible for. You may also qualify for the First Home Loan Deposit Scheme initiative, depending on your circumstances. 

To apply for a pre-approval on your home loan from Bendigo Bank, all you need to do is fill in a smart form. You could also contact the bank directly on 1300 236 344.

How do I save for a mortgage when renting?

Saving for a deposit to secure a mortgage when renting is challenging but it can be done with time and patience. If you’re on a single income it can be even more difficult but this shouldn’t discourage you from buying your own home.

To save for a deposit, plan out a monthly budget and put it in a prominent position so it acts as a daily reminder of your ultimate goal. In your budget, set aside an amount of money each week to go into a savings account so you can start building up the ‘0’s’ in your account.  There are a range of online savings accounts that offer reasonable interest, although some will only off you high rates for the first few months so be wary of this.

If you aren’t able to save a large deposit, you can consider ways of entering the market that require small or no deposits. This can include getting a parent to act as guarantor for your home loan or entering the market with an interest only loan.