According to the Australia Bureau of Statistics the mean price of a dwelling in NSW is $822,100, the highest in the country. This combined with equally high costs of living means it’s getting harder and harder to save for a deposit. This has been reinforced in recent housing figures published on Money Magazine’s website that show only 3.8 per cent of all home borrowing in August ‘16 going to owner occupied first home buyers.
While it’s evident there’s quite a bit of adversity first home buyers must face, believe it or not you’re probably not doomed to a life of perpetual renting or living under your parents’ roof.
You’ve likely been told there are two options available to you when saving for a home:
- Lender’s Mortgage Insurance to make up the difference between what you’ve saved and what you need for your deposit. This however could add thousands to the mortgage you’re taking out.
- Save, save, save. But while this sounds well and good, given the above figures it’s not always as easy as giving up the smashed avo on the weekend….
There might actually be a third option available to you. Now, you’ve probably heard of a guarantee, but the thought of having your loan tied to your parents for 30 years isn’t likely appealing. What you might not be familiar with is a ‘limited’ guarantee.
This can allow your parents to just guarantee the amount you need to make up your deposit. This means their security might not be needed after a few years1.
For your parents it means less risk compared to a traditional guarantee and it could save you thousands in Lender’s Mortgage Insurance1.
Rather than your parents having to secure your entire loan against their own property, a limited guarantee splits it into two separate loans. Here’s an example of how it can work:
Loan 1 (Guaranteed loan)
Loan 1 is designed to cover the difference between your savings and the deposit required for the property.
Loan 2 (Non-guaranteed loan)
The remaining 80% of the purchase price is held in a separate loan which is secured by the purchased property, as per a standard home loan. While you are fully responsible for the servicing of both loans, the Non-Guaranteed Loan may be set to interest only payments for an agreed period2, allowing you to focus on repaying Loan 1(your parents) as quickly as possible.
Not only is this feature available on our whole range of home loans, a dedicated Home Lending Specialist can set it all up in a way that suits you and your lifestyle.
Basically, what we’re saying is you might be able to have your smashed avo and eat it too - enquire today.
1. Terms, conditions, fees, charges and normal lending criteria apply. Regional Australia Bank Ltd reserves the right to determine eligibility for this service. 2. Terms and conditions apply.
