Dream on paper
It’s helpful right at the outset to have two lists, what you want and what you will settle for.
Then consider details, such as:
- Possible locations
- House, unit or townhouse
- How many bedrooms, yard size etc.
- Proximity to schools, public transport, parks and whatever else you need.
Research
Pretty much everyone who has ever bought a house will tell you they learned a lot. They will also say it is most useful things if you can learn before they purchased. Learning about serious mistakes after purchase leads to more challenges.
The housing market
- Begin researching market and property options in your preferred area and then, if that is unaffordable or doesn’t have what you want, move to your second or third choices.
- Good ways to research the market include attending auctions and open houses. Talk with the real estate agent and read brochures. Listen to what others are saying to have a feel for what price each property will go for.
- Review recent sales data on sites like Domain.com.au and Realestate.com.au
Track the properties you are interested in. Did they go for the price you expected?
Property types
If you are feeling overwhelmed by the prices you are seeing, consider these as well.
- Off-the-plan properties are ones that have not begun building when you purchase. You see the plan and sketches and decide from those. Reduced stamp duty is available to first time home buyers who are going to live in it. There are catches and risks however, such as delays in the property being completed – sometime extended delays. www.consumer.vic.gov.au/housing/buying-and-selling-property/buying-property/buying-off-the-plan
- Tiny homes, flat-pack options or transportable homes. Some of these are very affordable, although prices are going up as they become more popular. Recent legal changes make them more possible. https://www.vba.vic.gov.au/consumers/small-second-homes
- Regional properties are still sometimes cheaper and eligible for support. Other challenges of living regionally need to be considered, such as petrol costs, few jobs, lack of childcare spaces, distance from friends and family. https://www.housingaustralia.gov.au/support-buy-home/regional-first-home-buyer-guarantee
- Existing older homes may be priced lower but may also need structural renovations within a few years, so get a building inspection and factor in that additional cost, plus any repairs.
Time to consider money
Of course, you will have been thinking about money from the first moment, but now you are in a position to take a close look at your finances.
Deposit plus upfront costs
- Work out how much deposit you can save and use online loan calculators to get an idea of your borrowing power.
- Use tools like MoneySmart’s Budget Planner to list your income, essential expenses (e.g., rent, utilities, and childcare), and flexible spending. This will help determine how much you can save for deposits and ongoing homeownership costs, like mortgage repayments, rates and maintenance.
- Check your credit profile as a good credit score improves your borrowing power. Request a free credit report through platforms like Equifax or Experian. Address any discrepancies as lenders review your financial history closely.
- Check if you are eligible for the Family Home Guarantee Scheme with a 2% deposit. www.housingaustralia.gov.au/support-buy-home/family-home-guarantee
- If your only income is a Centrelink payment, the chances of a loan are very low. Family Tax Benefit can be helpful as additional income.
- Aim to save 5%–20% of the property value for the deposit. Start a dedicated savings plan for your deposit. Many banks offer high-interest savings accounts tailored to home buyers.
- Keep in mind the mortgage payments on the amount you are planning to borrow and save enough to have a few months’ payments as a buffer once you have your property.
- Stamp duty, now known as Land Transfer Duty, is an up-front cost. First-home buyers may qualify for a full exemption on properties valued under $600,000 or a discount for properties up to $750,000. https://www.sro.vic.gov.au/first-home-owner
- Legal Fees: Budget at least $2,000 for conveyancing and legal advice and keep checking online calculators each year.
- Inspections: Professional building and pest inspections cost $400–$800 but are essential to identify any issues.
- Lenders Mortgage Insurance (LMI): If your deposit is less than 20%, you may need to pay LMI, which can be added to your loan.
Loans
Many lenders offer packages tailored to single parents, with competitive interest rates and features such as offset accounts. This article is written by a company, but is useful as an overview: www.lmconnect.com.au/home-loans-single-mothers-melbourne
Bank Loans: the traditional path
Banks offer a variety of loan types secured against the property, which acts as collateral or security.
- Standard variable rate loans are ones where interest rate fluctuates with the market. This provides flexibility to make extra repayments but exposes you to potential rate increases.
- Fixed rate loans remain constant for a set period (e.g. 1–5 years), providing certainty in repayments but limiting flexibility. These are valuable if interest rates are low when the mortgage is secured.
- Split loans combine both fixed and variable rates, allowing you to balance stability and flexibility.
- Low-deposit loans are tailored for buyers with a small deposit (as low as 5%). Be aware though that lenders may charge expensive Lenders Mortgage Insurance (LMI) for deposits below 20%.
- Offset accounts can reduce interest by linking your bank deposits to the loan.
Redraw facilities in the loan allow you to make an extra repayment when you wish to reduce the interest payable on your overall loan. It is possible to redraw once you get ahead but generally not until the loan is trending down.
Traditional bank loans are ideal for individuals with a good credit score, stable income, and the ability to meet deposit requirements.
Banks also offer resources to guide first-time buyers, including pre-approval services.
Mortgage brokers can help you make sense of all the options and maximise your chances with small tricks, like keeping your savings in a separate account from your everyday account.
Pre-approval
Most lenders offer pre-approval, giving you confidence about what you can afford when you find the right property.
Speak to multiple lenders (banks, credit unions, or mortgage brokers) to understand your borrowing capacity. Pre-approval ensures you have a clear budget when searching for properties. Just remember that getting pre-approved doesn’t mean your loan is confirmed, however it is an in that you can start looking seriously.
Alternative Loan Options
If traditional bank loans aren’t suitable, alternative financing solutions may help you achieve your homeownership goals.
Types of Alternative Loans:
- Non-Bank Lenders like credit unions or fintech companies often provide loans with more lenient criteria than banks. They may also offer competitive interest rates and flexible terms.
- Peer-to-Peer Lending is an online platform not yet licensed to offer home loans in Australia. It can lend personal loans which can act as a deposit. Do your homework if you think this is for you. www.moneysmart.gov.au/managed-funds-and-etfs/peer-to-peer-lending
The ‘bank of Mum & Dad’
For those who have a family willing and able, this can be a flexible and supportive pathway to homeownership. Typically, guarantors are parents or siblings but some lenders also allow friends or other trusted individuals to act as guarantors.
- Guarantor: A family member uses their property as security for your loan, allowing you to borrow up to 100% of the property’s value without needing a large deposit. This option can reduce or eliminate the need for the expensive Lenders Mortgage Insurance.
- Direct loans or gifts: Family members may lend or give you money for a deposit or other housing expenses. Gifts should be documented to avoid later complications such as legal disputes between siblings if the parents who made the gift passes away.
- Shared ownership: In this arrangement, a family member co-purchases the property with you, sharing ownership and financial responsibility.
Benefits and Considerations
Family loans often come with flexible repayment terms or no interest, reducing financial strain. However, it’s crucial to establish clear agreements to avoid misunderstandings and protect relationships. Legal advice is recommended to document the terms formally.
Downsides
If a family member has guaranteed your loan, they are not responsible for loan repayments unless you default. However, their property may be at risk if you fail to meet your obligations.
They may also find it harder to refinance or borrow against their own property while acting as a guarantor.
No family member should engage in guaranteeing a loan without seeking their own advice including on:
- Their liabilities
- What can go wrong for them – if they need to sell or go on the Age Pension.
Encourage them to see a lawyer, perhaps talk to Centrelink and other relevant bodies.
Benefits
- You will have a reduced deposit requirement and may not need to save the usual 20% deposit, avoiding lenders mortgage insurance (LMI).
- Having a guarantor can help you access larger loans.
- Better interest rates may be offered due to reduced risk for the lender.
Find out more
- Speak to your lender to understand their guarantor policy.
- Ensure the guarantor receives independent legal advice to understand their obligations and risks.
- Consider ways to limit the guarantor’s liability.
Choosing the right type of loan
Each loan type has its benefits and challenges. Consider these factors when deciding:
- Assess your income stability, credit history, and savings to determine how much you can realistically afford.
- How much flexibility do you need? What if your circumstances change (e.g. new job, children’s education expenses).
- Compare interest rates, fees, and additional charges like LMI across different loans. Even
small differences in rates can significantly impact long-term costs.
Once you’re ready to buy
Protect yourself legally.
- Engage a licensed conveyancer or solicitor to ensure your contract of sale, vendor statements, and title transfer are handled correctly. They will check for any restrictions or surprises tied to the property, like easements or unpaid rates.
- Before signing anything, consider professional building and pest inspections to confirm the property is structurally sound. This can save you from unexpected and costly repairs down the track.
Documents you may need
- Valid ID such as a passport or driver’s licence.
- Proof of income: Recent payslips, tax returns, or Centrelink statements showing child support or family tax benefits.
- Bank statements: Evidence of savings history and financial stability.
- Pre-approval letter: From your lender, confirming your borrowing capacity.
- First Home Buyer Grant eligibility documents: If applying for the FHOG, ensure you provide proof of first-home buyer status.
Found a place? Research the Property
- Do a title search to ensure the property has no outstanding debts, disputes, or caveats. www.land.vic.gov.au/land-registration/for-individuals/property-and-land-titles-information
- Check local council zoning regulations for future development potential or restrictions.
- Review the Vendor’s Statement (Section 32): This document outlines key property details, including encumbrances, rates, or planned works.
- If buying an older home, consider asbestos checks or plumbing and electrical inspections.
Need extra help
- Buyer’s Advocates will negotiate on your behalf and help find properties. Search around though. Some charge a flat fee, others a percentage as high as 19% of the property’s price.
- A licensed conveyancer or property lawyer will guide you through the legalities of property transactions, ensuring contracts are in your favour and are legally sound, and helping with the settlement process.
- Hire professional building and pest inspectors to identify potential issues.
Contracts and Settlement:
- Ask your conveyancer or lawyer to review the Vendor’s Statement. Also known as a Section 32 statement, this is a legal document that a seller must provide to a buyer before the sale of a property in Victoria. The statement discloses information that may affect the value of the property, such as mortgages, covenants, easements, zoning, and rates.
- Cooling-Off Period – There is NO cooling off period for an auction. Three business days is usual for private sales.
Grants and Assistance Programs
Victorian Government Support
First Home Owner Grant (FHOG) is a $10,000 grant available for first-home buyers purchasing a newly constructed home or a substantially renovated property valued under $750,000 in the city. It doubles to $20,000 if you’re buying in regional Victoria.
The grant aims to assist buyers with upfront costs of purchasing, including deposit and legal fees. For example: If you purchase a newly built home valued at $650,000, you can use this $10,000 grant to reduce the amount you need to save for your deposit.
Victorian Homebuyer Fund (Shared Equity Scheme)
This scheme reduces the amount you need to borrow by having the Victorian Government contribute up to 25% of the property price in exchange for a share in the property.
How it works: For a $400,000 home, the government may contribute $100,000, leaving you to get a $300,000 mortgage. When you sell or refinance, you repay the government its share of the property value at that time.
Eligibility: You must have a 5% deposit saved, be an Australian citizen or permanent resident, and earn less than $125,000 per year (or $200,000 combined for joint applicants).
Mortgage Relief Program:
This program helps homeowners experiencing temporary financial hardship, such as job loss or illness, by providing short-term interest-free loans to cover mortgage repayments. It’s designed to prevent foreclosure and keep families in their homes.
Access: Call MoneyHelp Victoria (1800 007 007) to explore eligibility and apply for assistance.
Federal Government Support
Family Home Guarantee:
This initiative allows eligible single parents to buy a home with 2% deposit, with the government acting as a guarantor for up to 18% of the property price.
For example: For a $500,000 home, you need to save $10,000 as a deposit, instead of the typical $50,000 required for a 10% deposit. The government guarantees the remaining 18%, eliminating the need for lenders mortgage insurance (LMI).
Eligibility: Applicants must have at least one dependent child and cannot currently own property.
First Home Super Saver Scheme (FHSSS):
It is now possible to save for a deposit faster through the First Home Super Saver Scheme (FHSSS).
How it works:
- You make voluntary contributions to your superannuation fund, and benefit from lower tax rates compared to saving in a regular bank account.
- You can withdraw up to $50,000 of these contributions, plus any earnings on this amount, to buy your first home.
- This is not available to everyone. Check whether your super fund allows FHSSS withdrawals and consider seeking financial advice to ensure it aligns with your goals.
Key steps: Contact your super fund to confirm participation in the scheme and apply through the Australian Taxation Office (ATO) for a determination before withdrawal. https://www.ato.gov.au/individuals-and-families/super-for-individuals-and-families/super/withdrawing-and-using-your-super/early-access-to-super/first-home-super-saver-scheme
CSMC’s Housing resource was made possible thanks to the support of:
