Buying a home is a significant milestone, but saving for a deposit can be challenging, especially for first-time buyers. In Australia, there are several ways to buy your first home without having to save a large deposit. Here are the top 7 options available to help you get into the property market sooner.
1. First Home Loan Deposit Scheme (FHLDS)
The First Home Loan Deposit Scheme is an Australian government initiative that allows eligible first-time buyers to purchase a home with a deposit as low as 5% without needing to pay Lender’s Mortgage Insurance (LMI). The government acts as a guarantor for up to 15% of the home loan, helping to reduce the risk for the lender. To qualify, you need to meet certain income and property price limits, which vary depending on your location.
2. Family Guarantee or Guarantor Loan
If you have a family member willing to help, a family guarantee can be a great way to buy a home without a deposit. In this arrangement, a family member (usually a parent) uses their property as collateral to act as a guarantor for your loan. This allows you to borrow 100% of the home’s purchase price, eliminating the need for a deposit. It’s a popular option for buyers who can afford mortgage repayments but struggle to save for a deposit.
3. First Home Super Saver Scheme (FHSSS)
The First Home Super Saver Scheme allows you to save for your home deposit inside your superannuation fund. Contributions made to your super are taxed at a lower rate, which can help your savings grow faster. You can withdraw these savings to help fund your deposit when you buy your first home. While this scheme doesn’t eliminate the need for a deposit, it can help you save more efficiently and potentially reduce the amount you need to save.
4. No Deposit Home Loans
Some lenders offer no deposit home loans, which allow you to purchase a property without any upfront deposit. These loans typically require you to have a strong credit history and the ability to demonstrate your ability to repay the loan. While these loans can be hard to find and may come with higher interest rates, they can be a viable option for first-time buyers who need to get into the market quickly.
5. Borrowing the Deposit from Family or Friends
If you have family or friends who are willing to help, you may be able to borrow your deposit from them. This can be done by taking out a personal loan or by receiving a gift. Some lenders will accept this as part of your application, as long as it’s documented properly. It’s essential to discuss the terms of this arrangement with your family or friends, as it can involve both financial and personal risks.
6. Rent-to-Buy Schemes
Some developers and property companies offer rent-to-buy or rent-to-own schemes, where you can rent a property with the option to buy it later. A portion of your rent may be credited towards your future deposit, allowing you to eventually buy the home without saving a large deposit upfront. These schemes are becoming more popular in areas with high housing demand, providing an alternative pathway to homeownership.
7. Government-Backed Shared Equity Schemes
Some states and territories offer shared equity schemes, where the government or a partner investor provides a portion of the purchase price in exchange for partial ownership of the property. You’ll still need to contribute some funds for the deposit, but the shared equity arrangement can significantly reduce the amount you need to save. These schemes are typically designed to help low to moderate-income earners get into the housing market.
Conclusion
While saving for a traditional deposit can be challenging, there are several ways to buy your first home in Australia without having to save a large sum upfront. From government-backed schemes like the FHLDS and FHSSS to family guarantees and rent-to-buy options, there are plenty of opportunities to help you enter the property market sooner. Make sure to research each option thoroughly and speak to a mortgage broker to find the best solution for your situation.