With house prices continually increasing, getting into the Housing market seems impossible for first home buyers.
However, some are managing by looking outside the box..
OTHER SOURCES OF FUNDS
Digital Finance Analytics principal Martin North says many people are reaching for additional sources of funds to bridge the gap between what the bank is prepared to provide by way of a mortgage and what it really takes to get into the market.
“There’s quite a proportion of first home buyers who can only get into the market thanks to the Bank of Mum and Dad.
“If they don’t have the Bank of Mum and Dad and they still need to get more money to get into the market there is a proportion of first time buyers who are going for the personal loan or going for the credit card or pretty much any source of funds that they can to try and get into the market.”
BECOMING INVESTORS FIRST
There’s been a trend for first-time buyers to become investors first, rather than owner occupiers.
“They buy a cheaper property, not necessarily where they want to live, but at least that’s a way into the market,” Mr North says.
TEAMING UP WITH OTHERS
Mr North says some first home buyers are teaming up with others and it’s not necessarily someone they know well.
“I call them unholy alliances because you never quite know what’s going to happen down the track but that’s the other strategy that people are using.”
USING LMI IF DEPOSIT LESS THAN 20 PCT
Lenders mortgage insurance – which covers the lender, not the borrower – is generally required if someone does not have the standard 20 per cent deposit.
Buyers still need at least five per cent of genuine savings.
GETTING PARENTS TO GO GUARANTORS
Mortgage broker Mortgage Choice spokesperson Jessica Darnbrough says there has been an increase in people getting their parents or siblings to go guarantors for a home loan to avoid paying LMI, moving from one per cent to about three per cent over the last two years.
THE TRADITIONAL WAY – SAVING
“My observation is save as hard as you can if you want to get into the property market,” Mr North says.