So … you’ve decided to settle in Wollongong. Great choice! The next step is to buy THAT house. It isn’t as easy as it used to be but there are several things to get you started, like getting a home loan which will only require you to have a deposit (or sometimes none!) to move forward.
How much deposit do you need to buy a house?
Getting a home loan requires you to pay a specific portion of the property purchase price in cash -- that is your house deposit. Your deposit varies depending on the house you’d like to purchase and the home loan will cover the rest of the property price. Your financial situation or needs are big factors that you need to take into account.
If you pay 5-20% of the property price, you may need to pay for additional costs compared to spending a larger percentage home deposit.
Advantages of a bigger deposit
A bigger deposit will give your lender an impression that you are capable of paying your home loan. This will heighten the chance of your home loan application approval.
A bigger deposit means paying less interest. This will also give you the chance to finish off your loan sooner.
On the other hand, a 5-20% deposit is accompanied by additional costs such as the Lenders Mortgage Insurance.
Low deposit home loan
Let’s be more realistic, a 20% house deposit is still a bit of a challenge, especially for those who have other bills to pay, and groceries to buy. In an instance where the property value is at $500,000, you’ll need to pay a cash deposit of $100,000.
Some lenders can be considerate to let you borrow up to 95% of the property’s value. In this case, a $500,000 house can be yours for a deposit of $25,000 -- a much feasible amount. Through the LMI, a 5-20% deposit is possible, but still, the risk of smaller deposit fees should be expected.
Lenders Mortgage Insurance (LMI)
The Lenders Mortgage Insurance (LMI) covers the lender and not the person who is getting the home loan. LMI is paid to the bank’s insurer to cover the bank if you cannot pay for your home loan. You can pay your LMI as an upfront cost or, depending on how much LMI you have to pay, you can add it to your home loan amount.
An LMI is required if your home loan deposit does not reach 20% of the house’s or property’s “lender-assessed value”. The lender-assessed value is how much the lender values the property you want to purchase, or what is known as its “market value”. The remaining 80% the lender pays for you is called the ‘Loan-to-Value Ratio’ (LVR). The higher your LVR, the higher the risk to the lender, this is also the reason why an LMI is required for a house deposit of less than 20%.
No deposit home loan
Yes, you can still have your dream home at Wollongong even if you don’t have the cash deposit with the help of a family member who can act as a guarantor on the loan. Given that the family member is an immediate adult family member and agreed to put the equity of his or her property as a security for the property you’d want to purchase. This is a substitute for the cash deposit.
You can pay the home loan as normal after this. The good news is that after paying off part of the loan or after your property has increased in value, you can apply for the removal of your family member in the default payment liability of the no home loan deposit.
Other costs of buying a home
Aside from the deposit fees, there are other upfront payments you need to make. Things such as stamp duty, home insurance, pest and building inspections, and your moving expenses.
The stamp duty is probably the biggest upfront cost when it comes to buying a house in Australia (after home deposit). This varies from region to region so checking your state's official website is key to be updated.
This is compulsory if you have a mortgage. Again, this varies from state to state but expect it to be around $1000 a year for a $400,000 house.
Pest & building inspection
This is very essential to maintain the appearance of your home. Skipping an inspection can cost you more so it's better to follow the schedule. Having a well-maintained home will also help you maintain the value of your property in case you decide to sell it in the future.
Your moving expenses depend on how many things you have to carry, and how far the movers are taking them. It's best to look around for several companies, and get at least 3 quotes, to ensure a wise decision.
Buying a house in Wollongong
Buying a property in Wollongong is so much easier when you consult with a licensed real estate agent like Anthony Sorace
. Discuss your preferences with people who know the place and the processes and move to your dream house and be an official home owner the soonest! For excellent real estate services, call us at 0413 690 459.