When to Consider Buying a Unit as Your First Home

Getting Started as a First Home Buyer in Bayswater

If you're a first home buyer in Bayswater looking to purchase a unit, you're making a smart choice. Units often provide an affordable entry point into the property market, particularly in Melbourne's eastern suburbs where property values continue to be attractive for those buying your first home.

Purchasing a unit comes with distinct advantages - lower purchase prices compared to houses, reduced maintenance responsibilities, and often proximity to public transport and amenities. However, understanding your home loan options and the application process is essential to making this significant investment work for you.

Understanding First Home Buyer Eligibility

Before you start browsing property listings, it's important to know whether you meet the first home buyer eligibility criteria. In Victoria, you'll generally need to:

• Be an Australian citizen or permanent resident
• Be at least 18 years old
• Never have owned property in Australia before
• Live in the property as your principal place of residence for at least 12 months

Meeting these requirements opens the door to various government incentives designed specifically for first home buyers.

First Home Buyer Grants and Concessions

Victoria offers several schemes to help first home buyers:

First Home Owner Grant (FHOG)

The first home owner grants (FHOG) provides $10,000 for eligible first home buyers purchasing or building a new home. While this primarily applies to new properties, understanding what qualifies is important when considering newer unit developments.

First Home Buyer Stamp Duty Concessions

First home buyer stamp duty concessions can save you thousands of dollars. In Victoria, you may be eligible for:

• Full exemption from stamp duty on properties up to $600,000
• Reduced stamp duty on properties between $600,000 and $750,000

For unit buyers in Bayswater, this concession can make a substantial difference to your first home buyer budget.

Government Guarantee Schemes

The Federal Government offers schemes that can help you enter the market sooner:

First Home Loan Deposit Scheme

The First Home Loan Deposit Scheme allows eligible first home buyers to purchase a property with as little as a 5% deposit without paying Lenders Mortgage Insurance (LMI). This scheme has income caps and property price limits that apply.

Regional First Home Buyer Guarantee

Depending on your circumstances and where exactly in Bayswater you're looking, the Regional first home buyer Guarantee might apply, offering similar benefits to the standard scheme but with different eligibility criteria.

Creating Your First Home Buyer Checklist

Organisation is key when buying your first home. Your first home buyer checklist should include:

1. Saving your deposit (aim for at least a 5% deposit or preferably 10% deposit)
2. Researching low deposit options and government schemes
3. Getting your finances in order and understanding your borrowing capacity
4. Gathering required documents for your first home loan application
5. Obtaining pre-approval before you start house hunting
6. Understanding strata reports and body corporate fees (crucial for unit purchases)
7. Arranging building and pest inspections
8. Finalising your home loan application

Understanding Your Deposit Options

When planning to purchase a unit, you'll typically need:

• A minimum 5% deposit through government schemes
• A 10% deposit to access more lenders and potentially avoid LMI through lender promotions
• A 20% deposit to avoid LMI entirely

If family members want to help, a gift deposit may be accepted by lenders, though specific conditions apply. This can be particularly helpful when trying to reach that 10% or 20% threshold.

Choosing Between Interest Rate Options

When you apply for a home loan, you'll need to decide on an interest rate structure:

Fixed Interest Rate

A fixed interest rate locks in your rate for a set period (usually 1-5 years), providing certainty with your repayments. This can help with budgeting as you settle into your new unit.

Variable Interest Rate

A variable interest rate fluctuates with the market. While there's less certainty, you may benefit from interest rate discounts and have access to features like an offset account or redraw facility.

Many first home buyers choose a split loan, combining both fixed and variable portions.

Loan Features to Consider

Offset Account

An offset account is a transaction account linked to your home loan. The balance reduces the interest you pay on your loan, potentially saving thousands over the life of your first home loan.

Redraw Facility

A redraw facility lets you access extra repayments you've made on your loan. This provides flexibility if unexpected expenses arise after you've moved into your unit.

The First Home Super Saver Scheme

The first home super saver scheme (FHSS) allows you to save money for your deposit inside your superannuation fund, taking advantage of the concessional tax treatment. You can contribute up to $15,000 per year (up to a total of $50,000) and then withdraw these contributions plus earnings to put towards your first home.

Understanding Lenders Mortgage Insurance (LMI)

When you borrow more than 80% of the property value, Lenders Mortgage Insurance (LMI) typically applies. This insurance protects the lender if you can't meet your repayments. LMI can add thousands to your upfront costs, which is why accessing a 20% deposit or using government schemes to avoid it can be beneficial.

The Pre-Approval Process

Obtaining pre-approval before you start shopping for units gives you:

• A clear understanding of your budget
• Confidence when making an offer
• A faster settlement process once you find the right property

Pre-approval typically lasts 3-6 months, giving you time to find the perfect unit in Bayswater.

Special Considerations When Buying a Unit

Unlike purchasing a house, buying a unit involves additional considerations:

• Body corporate fees and what they cover
• Strata reports detailing the building's financial health
• Building insurance (usually covered by body corporate)
• Parking and storage allocation
• Pet restrictions
• Renovation limitations

Your lender will also assess these factors when processing your first home loan application, as they affect the property's value and suitability as security.

Making Your Move

Purchasing your first home as a unit in Bayswater is an achievable goal with proper planning and the right guidance. Understanding your home loan options, taking advantage of available concessions and grants, and working with experienced professionals can make your journey into homeownership smoother.

At Home Step Finance, we specialise in helping first home buyers understand their options and find the right home loan solution for their circumstances. Our team knows the Bayswater area and can guide you through every step of your first home buyer journey.

Call one of our team or book an appointment at a time that works for you. Let's discuss your home loan application and get you into your first unit sooner.