When Emily applied for a home loan, she had an emotional "meltdown". A combination of factors had led to that moment. There was the pressure of being in debt during the prime years of her life. There was confronting the process of getting the mortgage which she knew little about and on top of that, she had also asked her parents to be guarantors on the loan.
Emily felt the weight of their trust on her shoulders. Questions were running through her head. How will her parents feel if she fell behind on loan repayments? Could she be exposing them to unnecessary financial risk? Emily knew she wanted to own her home. But was she responsible enough? Was she ready for a mortgage?
"I just wanted something to call my own to say that I have worked and I have saved. This is what I have to show for it"
“I started to panic and said I didn't know if I could do it,” recalled Emily. It would have been easy to walk away on that first home dream in that moment. But on the day of the home loan application, Emily had been meeting with Theresa, a mother herself and a Regional Australia Bank Lending Specialist helping people into their first homes for 25 years.
Theresa said to her: "Your mum and dad would not have offered to be guarantor for you if they didn’t think you could do it. You can do it. You are capable of doing it."
Emily got the loan and bought an apartment, her first home, at 25 years old.
Now at 26, and a new homeowner, Emily explains that while nervous about the commitment she has made, buying a home has led to a new level of freedom and autonomy that she hadn't considered.
“I could put a picture on the wall. I could design the kitchen the way I want. When you’re renting, you can’t do these things,” she said.
“I was surprised that this has all happened. I didn’t ever think that I would be able to go through the process of making this home mine.”
The statistics are grim for people like Emily who want to buy their first home. According to domain.com.au, the average Sydney renter has to save for at least six years or more to afford a deposit.
A couple of years ago, Emily escaped the astronomical Sydney rents to move to Tamworth for her first teaching job. As the job required a long-term commitment, she wanted to buy her first home in Tamworth. “I just wanted something to call my own to say that I have worked and I have saved. This is what I have to show for it,” she said.
She didn't need to spend time finding her perfect first home. It was going to be the apartment that she was living in. All Emily had to do was get the owner's blessing to sell the apartment to her. She got her wish.
Now Emily had to find the money to buy the apartment. She confessed that she knew nothing about applying for a home loan. She had saved for about six months, but she was not sure if those savings could justify taking out a mortgage. Out of her depth, she met with Theresa, to clarify the home-buying process and explore her options.
Theresa suggested that she could afford a home loan if her parents agreed to act as a guarantor using Regional Australia Bank's Head Start Family Guarantee. The loan mean that her parents can act as guarantors but only for the small amount she needed for her deposit and only for a short period of time. This appealed to Emily as she could minimise the risk for her parents.
“That made the process easier and less stressful for me,” she said.
“Knowing that I could be paying off the guaranteed portion of the loan first made me feel a lot more relaxed because that means most of my repayment is going back to Mum and Dad first.”
“Knowing that I could be paying off the guaranteed portion of the loan first made me feel a lot more relaxed because that means most of my repayment is going back to Mum and Dad first.”
“The Tamworth Branch went above and beyond - they even gave me a rough budget sheet to help me see what I was spending on things. Then Theresa helped me adjusted it to explain that this was possible - that buying a home was a reality - not just a dream” said Emily.
Emily had spoken to her mother previously about acting as a guarantor for the home loan. Her mother agreed to it only after checking whether the option was viable.
Emily was grateful for her parents to be able to step in as guarantors. Many of her friends parents were not in the same financial position as her parents to act as guarantors for a home loan.
Emily said while her parents were not considered “wealthy”, they were in a position to help her. Without their support, she would still be renting. Nevertheless, Emily is keen to pay off the Head Start Family Guarantee portion of the loan within five years so that her parents would no longer be guarantors of her apartment.
“If my brother or sister ever wanted to get help from my parents as guarantor, then I have to make sure it is paid off so they can offer the same opportunity to my siblings,” she said.
Emily said she was surprised at the affordability of the loan and how the bank helped her budget for the repayments. Theresa also followed up with her by phone after she bought the apartment.
“She actually rang me back a few weeks later after I had settled into the home just to see how everything was going, whether everything was on track. I thought that was really lovely,”
“Paying a mortgage is more logical. At the end of renting, what do you have? Nothing. If you have a mortgage, you have a home.”
Knowing what Emily knows now she said in hindsight, that she would educate herself more about the home loan process and improve how to budget to help grow her savings. For people like her who were thinking about buying their first home she recommends speaking with a home loan specialist earlier if they are unsure about their financial position and to not be afraid to ask questions.
First home buyers should be asking themselves questions like:
- What sort of money do I have?
- What should be my financial status before I could start looking at a home?
- What do I have to do to get a home loan?
For many younger first time home buyers, having a mortgage can be a huge amount of financial pressure. However, when asked if she felt “more free” for having the mortgage, Emily said yes.
“Paying off a mortgage is more logical. When you finish renting, what do you have? Nothing. If you have a mortgage, you have a home.”
