Buying your first home isn’t always an easy process. Especially for people with zero to no property knowledge. Aside from scouring online for properties you want to live in, you also have to negotiate a price you can afford.
But perhaps the biggest struggle in your journey to homeownership is on saving for your downpayment. Unless you’re earning more than $160,000 a year, saving up for your deposit will be a lot of work. Of course, you need money to pay for your downpayment, it’s not going to pay itself!
Committing to buy a home can is one of the major financial decisions you’ll have to do as an adult. Once you put a downpayment, you’ll have to save money to pay for your home every month for a number of years. Especially now when the pandemic is constantly forcing things to find a new way to move on. While it is a difficult situation for many across the world, the Australian Government has implemented several measures to help first homeowners proceed with their plans during this pandemic, including the HomeBuilder grant and stamp duty exemption up to $800,000.
Despite this, we believe that owning a home is one of the best things you can do for your financial life.
So if you’re wondering what special advantages you can get for being a first-time homeowner, then read on.
First Home Loan Deposit Scheme (FHLDS)
The First Home Loan Deposit Scheme is a government-funded grant that enables first-time Australian home buyers to purchase a home for the 2020-2021 year. This is available for low and middle-income earners who are earning around $125,000 a year or $200,000 for couples.
First-time homeowners usually save up to 20% of their property value for a deposit, but with this grant, homeowners can pay as little as 5% for their home deposits and get a home loan without having to pay Lenders Mortgage Insurance fees. Under the maximum regional price cap under the scheme, a first-time home buyer can save as much as $10,000 to $30,000 worth of LMI fees.
Here are just some of the many benefits of FHDLS:
4 years and 3 months off the time it takes to save for a deposit on a $400,000 house
Up to $30,000 savings in LMI fees
1 in 10 first time home buyers will secure a loan
Thanks to the FHDLS many Australians will have the means to take out a home loan this year and the next!
Houses are valuable assets and as a homeowner, you will have home equity. This is a great source of fund which you can also use as credit or loan. Your home equity is basically the percentage of the home that you own. When you take a mortgage to purchase your home, your lender also has an interest in your property. Over time, as you pay your mortgage, your lender’s interest shrinks and your equity grows.
By now you know that your home’s value will grow in the market over time. So essentially, the longer you have your property, the more equity you’ll have. This home equity you have can be then used to buy a second home through home equity loans. It can also be used as a home equity line of credit which you can use as a source of potential funds.
Wondering what’s your current home equity? You can calculate it by dividing your loan balance by market value then subtracting the result from one and converting the decimal to percentage.
1 – (180,000 / 400,000)
0.55 or 55%
Security and Stability
Having a home isn’t just a source of pride for many homeowners. It also adds to living security. Unlike renting where your homeownership is based on your landlord, owning a home gives you freedom and safety. Nobody can kick you out if they suddenly decided they no longer want to you in their compound or if you fail to pay your lease. You also won’t have to worry about rent increase. Having a home will allow you to sleep soundly because you call the shots.
As a homeowner, you’ll also have the advantage of knowing how much you have to pay every month for your mortgage. Unlike rent which can increase through time based on economical factors or your landlord, your mortgage payment will be the same for as long as 30 years. So instead of worrying about rent every month, you can actually save money and manage your finances better.
Furthermore, having a home in a neighbourhood for years will give you a sense of community. This allows you to establish long-lasting friendships with your neighbours. Moving can be stressful, owning a home saves you from the anxiety and dread of changing locations all the time.
Freedom to Decorate
Living in rented apartments means you can’t do major renovations or change much in your property. This isn’t the same case when you own a home. When you own a home, you literally can do anything you want. You have all the freedom to take down walls, paint your bedroom in neon colours, replace tiles, add rooms in your house.
No one’s going to evict you for breaking the rules — because you make the rules. Plus, these home improvements will increase the value of your property. So, every dollar you spend in your home will go back to your pocket.
Homeownership is a good way to reduce your taxes. As long as your mortgage is smaller than the price of your home, the interest can be deducted on your tax return. For a lot of people, this is a huge sum since interest payments are one of the biggest percentages of mortgages each year.
If you’re working at home, you can also claim deduction on some areas where you work. You can deduct things like your mortgage payment, home insurance, depreciation of office equipment, and telecommunication costs (your internet and phone). The more tax deductions, the more money you keep in your pocket.