Get into a home with only $3000? Really?

Can you actually get into home by not putting down more then $3000? What’s the catch? This marketing slogan is usually phrased like “get started with $3000”, so after this start, what’s coming next?

This way of marketing is aimed at, and only applicable to, first home buyers. And moreover, first home buyers that are eligible for low deposit lending. And moreover, first home buyers that are eligible for low deposit lending that are buying in an area where the deposit on the land is low.

Where the deposits for builders and land to lock everything in could well be under $3000 together to get started, many land developers ask for a $2000 deposit and most builders need at least $1500 to get started and often $3000 as a full deposit. It’s a bit like the advertising for cheapest flights: they’re only available if you want to fly on a certain date. You’ll greatly increase your options if you have $5000 saved for your deposits. Like you can fly to Bali for $150 on certain dates, but with $300 you can fly pretty much any day you choose. The difference is that deposits do come off the package price in the end, so it’s not money lost, just put in earlier.

So yeah, you can “get started” with $3000 or $5000, but you will need to outlay some more after a few months and well before you get into your home:

So let’s say you’ve saved up $5000 and you sign up for a House and Land Package; you put down this deposit for the land and builder, which will be the only money you’ll have to put in until you settle on the land (which can be months down the track). During those months you can save more money again. At settlement, if you go through a bank, you will have to pay the rest of the deposit the bank requires (so let’s say you need 5% on a $400000 package = $20000, you’ve already paid $5000, so you need to hand over another $15000 then). If you go through a low deposit lender this first $5000 is probably covering the deposit the bank requires. (See here for more on low deposit lending.)

After you settle on the land your repayments will start. If you going through low deposit lending you pay only $50 per week as a minimum, through a bank you pay the interest on the mortgage you have on the land and later the progress payments for the builder will be added to this mortgage, having your monthly repayments go up with every stage. If you are a first home owner those will be the only costs as your First Home Owners Grant (FHOG) will take care of all the cost associated with the purchase (like settlement costs) and you are exempt for stamp duty. If you’re not a first home owner, this will need to come from your savings together with your deposit.

So, long story short: contact me to find out which options you are eligible for and exactly what costs you should be expecting at which stage. Once you’re clear on what you need and when and you’ve made a budget; you know if you are ready or not.

#finance #deposit #keystart