Monthly Chronicle - - Front Page - WITH RAJ LAD­HER

from mort­gage ad­viser Raj Lad­her

With Sydney prop­erty prices sky­rock­et­ing over the past 24 months, first home own­ers are the first to get hit. Fig­ures re­leased by ING Di­rect found that the av­er­age age of first home own­ers in Australia had in­creased from 34 to 37 in the past decade, and in NSW it’s higher at 38.

Not sur­pris­ing with the av­er­age Sydney house cost­ing $1m and apart­ments $660,000. Based on these fig­ures, a 10% de­posit and the stamp duty costs would equate to around $145,000 to buy a house and $95,000 an apart­ment.

There are sev­eral op­tions al­low­ing first timers to get onto the prop­erty lad­der sooner.

1. Expert advice – first home own­ers need to ed­u­cate them­selves early on. Speak­ing with a qual­i­fied mort­gage pro­fes­sional can pay div­i­dends as they know the mort­gage mar­ket, and will give you a plan tai­lored to your per­sonal cir­cum­stances. Get­ting a bud­get in place will al­low you to stick to this plan.

2. Low de­posit

mort­gages – although many banks have tight­ened up their poli­cies on bor­row­ing ca­pac­ity and loan to value ra­tios, there are still some banks of­fer­ing a 95% mort­gage. While these types of mort­gages at­tract a higher level of mort­gage in­sur­ance, it does al­low first home own­ers to get onto the prop­erty lad­der sooner and start build­ing eq­uity. 3. Fam­ily guar­an­tee – if you have a par­ent who has eq­uity in their prop­erty, some banks may use that as col­lat­eral in or­der to mit­i­gate you re­quir­ing a de­posit. The bank will pro­vide you with up to 100% of the pur­chase price plus costs. Se­condly, if you’re slightly short to bor­row the full amount of the loan, some banks may take your par­ents’ in­come into con­sid­er­a­tion. Once your prop­erty is at an 80% loan to value ra­tio or your in­come is enough to sup­port the loan, the banks can re­lease your par­ent(s) of their re­spon­si­bil­i­ties.

4. Rentvest­ing – more first home own­ers are mov­ing to ‘rentvest’ in or­der to get their foot onto the prop­erty lad­der – where you pur­chase an in­vest­ment prop­erty in a location you can af­ford and you con­tinue to rent where you want to live, such as close to the city or work. As this is an in­vest­ment pur­chase, you need to seek pro­fes­sional advice to see if this option suits your cir­cum­stances.

5. First home owner

con­ces­sions – there are many grants and con­ces­sions avail­able for first home own­ers, though in NSW you gen­er­ally have to buy a brand new prop­erty for less than $650,000 to be el­i­gi­ble. These con­ces­sions are only gen­er­ally avail­able for owner-oc­cu­pied prop­er­ties. Re­fer to the Of­fice of State Rev­enue web­site for grants and con­ces­sions.

Step­ping stones

While get­ting onto the lad­der is the im­por­tant part, this first prop­erty may not be your for­ever home - that may be be out of your range - but a two bed­room apart­ment or smaller town­house could be af­ford­able. Don’t for­get when you sell to up­grade to your next prop­erty, that the profit is tax free if it’s your prin­ci­pal place of res­i­dence. Raj Lad­her is a lo­cal expert on mort­gages and fi­nan­cial mat­ters. Originally from the UK, his con­sul­tancy firm is now based in Sydney.

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