Could apartment living help you dive into the property market sooner?
Buying a home for the first time can be challenging, especially with house prices soaring in recent years. So could switching from house hunting to unit searching be the way forward for you?
There’s no denying that getting into the property market in today’s economic climate ain’t easy.
The average Australian house price is now $725,000 – that’s 30% more expensive than the average national unit price.
Compare the price gap to September 2021, when the national median house price was $570,000 – just 9.6% higher than the median unit price of $520,000.
But is opting for a unit the right move for you?
Today we’ll look into the pros and cons of buying an apartment for your first home.
Affordability, lifestyle and location
First the pros: units are usually more affordable than houses.
Median capital city house prices have grown 31.6% in the past five years, while units have only increased by 9.8%.
Lower prices can not only make it quicker for you to save a deposit for an apartment, they could also make you eligible for better stamp duty concessions (either reducing your stamp duty bill or eliminating it entirely, depending on your state or territory).
And while a unit may not always have space to accommodate future expansions to your life and family, they are often located in thriving local community hubs with amenities, shops, and transport on your doorstep – great for young families still wanting to be in the thick of the action.
Potential for investment
Admittedly, owning a house can have advantages over owning a unit.
For starters, you don’t have to fork out for body corporate fees. And the capital growth you can gain from owning the plot of land your abode sits on often makes house ownership more attractive.
But buying a unit – rather than holding off until you can afford a house – also offers investment potential.
By purchasing a unit, you’re investing and building up your own equity, rather than paying off someone else’s mortgage if you’re renting.
So while you may not be able to buy the house just yet, an apartment can provide a valuable stepping stone to reaching that goal.
And should you be in a position to hang onto your unit when you upgrade to a home, you may get some decent rental income – if you buy in the right spot.
On top of this, unit upkeep can be easier because those body corporate or strata fees go towards various maintenance activities.
Other affordable options
All that said, if apartment living isn’t for you, there are other cost-effective options for you to explore.
You could consider searching slightly further afield, with recent research identifying “sister suburbs” that are up to 200% cheaper than their in-demand neighbouring suburbs.
Rent-to-own arrangements could also make it easier for you to crack the market. These arrangements enable tenants to buy the property they’ve been renting once the lease ends, at a previously agreed price.
And whether you’re in the market for a house or a unit, there are government schemes that can help you fast-track home ownership and save.
The federal government has three low deposit, no lenders mortgage insurance (LMI) schemes available for eligible first-home buyers, regional first-home buyers, and single parents.
Eligible buyers can purchase a home with a deposit as little as 5% through the First Home Guarantee and Regional First Home Guarantee. While the Family Home Guarantee assists eligible single parents and guardians to buy with a 2% deposit.
Not paying LMI can save you anywhere between $4,000 and $35,000 – depending on the property price and your deposit amount.
The good news is that eligible first-home buyers can bundle the federal home guarantee schemes with other state government first-home buyer grants and stamp duty concessions for major savings.
Get in touch
If you’d like to give renting the big swerve and get a place of your own, give us a call.
Not only can we help you find a suitable loan and help organise your finances, we know the government schemes you may be eligible for to help get you into your first home sooner.
Get your pre-approval!
Home Loans Made Easy: A FAQs Guide for Australians
How much deposit do I need for a home loan in Australia?
The amount of deposit you need for a home loan in Australia will depend on the lender and the type of loan you are applying for. Generally, you will need a deposit of at least 20% of the purchase price of the property. However, there are some lenders that offer loans with a lower deposit requirement, such as 5% or 10%. If you have a lower deposit, you may have to pay lenders mortgage insurance (LMI).
How much can I borrow for a home loan in Australia?
The amount you can borrow for a home loan in Australia will depend on your income, expenses, debt, and credit history. Lenders will use a lending calculator to determine how much you can borrow. This calculator will take into account your debt-to-income ratio (DTI), which is the percentage of your monthly income that goes towards debt repayments. Lenders will typically lend you up to 80% of the purchase price of the property if your DTI is below 80%.
What is LVR home loan?
LVR stands for loan-to-value ratio. It is a measure of the amount of money you are borrowing compared to the value of the property you are buying. For example, if you have a 20% deposit, your LVR will be 80%. Lenders will use your LVR to determine your borrowing power and the interest rate you will be offered.
How to get a home loan in Australia?
Getting a home loan in Australia can be a daunting process, but it doesn't have to be. Here are the steps involved:
Get pre-approved for a home loan. This will give you an idea of how much you can borrow and what your interest rate will be.
Find a property you want to buy.
Make an offer on the property.
Get the property appraised. This will determine the property's market value.
Apply for a home loan.
Provide the lender with the required documentation.
Close the loan and get the keys to your new home!
Should I fix my home loan?
Whether or not you should fix your home loan depends on a number of factors, such as your risk tolerance, your financial situation, and your expectations for interest rates. If you are concerned about interest rates rising, then fixing your home loan may be a good option for you. However, if you are willing to take on some risk, then you may be able to save money by leaving your home loan variable.
Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.