First Home Owner Schemes vs. Home Investment
Which way to own your first home?
Congratulations on taking the first step towards homeownership! We understand that entering the property market can be a daunting experience, especially for first home buyers who still live at home. With the dream of owning your own property and the allure of government-backed first home owner schemes, it's essential to weigh your options carefully.
In this article, we'll explore the pros and cons of first home owner schemes versus buying your first home as an investment to help you make an informed decision.
The Reality of Serviceability
When it comes to applying for a home loan, serviceability is a critical factor that banks assess. It's a simple concept that compares your income to expenses, helping lenders determine how much they can comfortably lend you. As a rough rule, your loan amount cannot exceed six times your annual income.
For example, if you're earning $80,000 per year, the bank may lend you up to $480,000.
The Northern Beaches Conundrum
We understand that living in a vibrant city like Sydney, especially in the picturesque Northern Beaches, has its allure. However, property prices in these areas can be prohibitive for first home buyers, especially if they rely solely on their income and available savings. This reality might seem deflating, but don't let it discourage you; there are options worth exploring.
Option 1: First Home Owner Schemes:
First home owner schemes have been introduced by the government to support and encourage young Australians to enter the property market. These schemes offer financial incentives such as grants and stamp duty concessions, making homeownership more accessible for eligible first home buyers.
The advantages of First Home Owner Schemes:
Financial Boost: The grants and concessions provided by these schemes can be a substantial financial boost, helping you bridge the gap between your savings and the required deposit.
Lower Initial Costs: Reduced or waived stamp duty can significantly lower your upfront costs, making it easier to step onto the property ladder.
Faster Entry: With the assistance of these schemes, you can expedite your entry into the property market, potentially taking advantage of future property price appreciation.
Option 2: Buying Your First Home as an Investment:
Instead of rushing into buying your first home to live in, you might consider purchasing a property as an investment while continuing to live at home. This approach allows you to capitalize on the rental income and potential property appreciation to improve your serviceability for future purchases.
The advantages of Buying Your First Home as an Investment:
Increased Serviceability: Rental income from your investment property can boost your serviceability when applying for future home loans. This additional income can be a game-changer in qualifying for a higher loan amount.
Flexibility: Buying an investment property allows you the freedom to choose where to invest, potentially exploring more affordable markets without the constraints of location.
Wealth Creation: Over time, your investment property can appreciate in value, building equity that you can use for future investments or a future home upgrade.
Which Option is Best for You?
Choosing between a first home owner scheme and buying your first home as an investment depends on your financial goals, long-term plans, and risk tolerance.
As mortgage brokers, we specialise in helping first home buyers like you navigate these complex decisions. By booking an appointment with us, we can discuss your unique circumstances and create a tailored strategy to achieve your homeownership dreams.
As a first home buyer, you have exciting options to explore in your journey towards homeownership. Whether you choose to take advantage of the first home owner schemes or embark on a property investment path, remember that a well-informed decision is the key to your success.
At Sandcastle Finance we are here to guide and support you throughout this process. Our expertise in mortgage solutions and understanding of the property market can help you make the right choice.
Don't hesitate to book an appointment with us today, and let's work together to turn your dream of owning a home into a reality!
Sally Prowse
Director
Ph: 0400 570 051
Email: sally@sandcastlefinance.com.au
Camilla Bowhill
Finance Broker
Ph: 0403 852733
Email: camilla@sandcastlefinance.com.au
For more First Home Buyer resources, check out our First Home Buyers’ guide here to help you get into the property market sooner.