Though interest rates are low, it’s not easy for most first home buyers to save for a home deposit. Though home values are rising, there’s no reason why you can’t get into the property market.
If you’re looking for an affordable way to enter the property market, here are alternative ways you can do it.
- Have others buy with you
You can buy a property with friends or family easily with the help of some leading lenders. This way you can divide the debts across two or more people. However, you have to be aware that this type of loan is creating a business partnership, which can be risky. For example, problems could arise if only one party is willing to sell in the future.
Banks have different rules that affect both lending requirements and the terms of a joint loan, so having a solicitor study the terms first will be beneficial.
To avoid future problems, draw up an exit strategy and an agreement in case there is a change in circumstances before you sign up for this loan.
- Family equity loans
Family equity loans let parents guarantee a loan and use their own home as security. This leaves the principal borrower as the only name on the loan and the title.
This option is ideal for those who have difficulty saving for a deposit, which is probably most young people. These include people who are not ready to rentvest or live out of the city.
This loan allows first-time homebuyers to avoid lender’s mortgage insurance.
- Consider the various property types
There are different types of properties, and one type to consider is off-the-plan purchase. This is when you buy a property before it has been built, typically as part of an apartment block or a series of townhomes or units.
It is worth considering because of the significant amount of stamp duty concessions for these property types. However, note that their prices are not determined by market forces, but by whatever price the developer sets on it.
Rentvesting is another way to enter the property market. This is when you rent where you’d like to live but can’t afford while owning and renting out property in an area where you can afford but wouldn’t like to live.
Investment property is generally cheaper to own, thanks to tax deductions, the tax deductible on the interest, and the rent you are receiving. These three items combine means that you can afford a $700,000 investment property, but probably not a $700,000 home loan.
- Homes in the rural and regional areas
You can find more affordable homes in rural and regional areas. For investors, the returns can also be favourable, if the property is in the right location.
This is an option for people looking for a lifestyle change or want to live in a commuter town, but buyers should carefully consider this approach.
Make sure the property you choose meets your lifestyle requirements. Whether you want to live in a beachside area, on a large block or in a slightly far off rural town, you should factor in in your choice of property.