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7NEWS
10-07-2025
- Business
- 7NEWS
First home buyers: how to save a 5 per cent deposit in six months for a $600k home
The countdown is on for first-time buyers hoping to enter the market with as little as a 5 per cent deposit, thanks to upcoming changes to the federal government's First Home Guarantee Scheme (FHGS). From 1 January 2026, the program will relaunch with expanded eligibility, opening the door to many more would-be homeowners, including scrapping income caps and opening the FHGS to permanent residents and joint applicants who haven't owned property for some time. How is the First Home Guarantee Scheme changing? The revamped FHGS will continue to allow eligible buyers to purchase a property with just a 5 per cent deposit, while the government steps in to guarantee the remaining amount, removing the need for costly Lenders Mortgage Insurance (LMI). This means if you plan to buy a $600,000 home, you'd only need to front a $30,000 deposit. But beyond the low deposit, there's some pretty significant shake ups. The government is scrapping the income cap: buyers are no longer restricted by income thresholds. Previously, this was capped at $125,000 for a single and $200,000 for joint applicants. Come January, there will also no longer be a property price cap. Purchase price limits will be removed, subject to lender assessment. And finally, there is now extended eligibility: individuals who have not owned property in the past 10 years, including permanent residents, can apply. A great opportunity, with a caveat Personal finance expert at Finder, Sarah Megginson, says the scheme is a game-changer, but buyers need to act now to get their finances in order. "This plan will give all first-home buyers access to 5 per cent deposits when buying a home, making the prospect of home ownership far more realistic for some who want to enter the market," she said. For example, if a property costs $850,000, a buyer needs to save a deposit of $42,500. "Without this plan, they would also need to fork over a huge sum for Lender's Mortgage Insurance, which could be upwards of $20,000." But Ms Megginson also warns that property competition will heat up even more. "All first-time buyers will have access to this, so it enables a large number of people to buy a home, but does nothing to address supply," she said. "A policy like this creates a lot of demand - which could see property prices in the affordable range increase, as first-time buyers battle each other to get into the market." Your six-month saving window: Strategies to save $30K If you want to hit the ground running when the scheme relaunches in January 2026, the next six months is your window of opportunity. If you're on the average Australian salary of $100,000, your purchasing power sits around the $600,000-mark, meaning you'll require $30,000 for a 5 per cent deposit. Ms Megginson says the key to building a $30,000 deposit quickly is breaking it down into smaller, manageable milestones. "Saving $30,000 sounds like a massive mountain to climb, but smaller financial goals are easier to achieve and as you tick each one off, it gives you the momentum to keep going." You're aiming for $5,000 per month, and to understand your personal financial picture, there's no way around creating a budget. "Tracking where your spending is going is key to plugging those money leaks," says Ms Megginson. "Take a look at your spending and split it into 'nice to have' and 'need to have'. Anything in the 'nice to have' category is a contender to cut back on." Here are some more strategies to get serious about saving. Move back home While it won't be possible for everyone to take advantage of the privilege of moving home, if you have the ability to move back in with your parents or another family member and stop paying rent, you should absolutely take it. Rents skyrocketed over the past few years, with Australia experiencing its longest stretch of continuous rental price growth in history, far outpacing wage growth. No matter which way you slice it, rent takes up the biggest proportion of would-be homeowner salaries, keeping renters in a vicious cycle where they're unable to make headway on a house deposit despite demonstrating the financial ability to pay the equivalent of a mortgage. Removing rent from the picture is undisputedly the way to turbocharge savings. "It's short-term pain for long-term gain. It can help you save a fortune on rent and other bills to fast-track your savings goal," Ms Megginson said. If you're in Sydney, for example, this one move could save you between $1700 and $3250 a month on rent alone, if your rent sits between $400 and $750 per week. House sit or change rentals If that's not an option, and you mostly work from home, consider house sitting as a rent-free alternative. While it can be tricky to line up house sits perfectly, and the extra admin of applying for sits and then caretaking animals can be stressful, it's a creative way to stop paying rent (or even take a break while living with your parents). The other option is to reduce your rental footprint by either sharing with more housemates, or changing rentals to a smaller property or more affordable area. Trim your lifestyle spend No one wants to go without their little luxuries, but remember, it's only for six months. "Really, it's about looking at your overall lifestyle spending," said Ms Megginson. "If you're serious about saving, you need to catch public transport instead of Uber, and stop getting food delivery altogether - it's seriously so expensive and so much cheaper to buy takeaways without the Uber premium. Eliminate any 'buy now pay later' accounts, too." Subscriptions are the other place to look. If you're signed up to three or four different streaming services, for example, it's time to cull it down to one. You can even change that one platform every month or two, rotating through them all and catching up on shows. But Ms Megginson is also quick to point out that this doesn't mean cutting out everything fun. "Make sure you're not living off 2-minute noodles and stripping all the fun from your life! You don't have to sacrifice all the things that bring you joy. "Just be mindful with your spending, so that when you invest in lifestyle extras - like takeaway coffee, a gym membership or Sunday brunch - you're spending on something you really enjoy, not just spending out of habit." Evaluate and renegotiate your bills Take stock of your household bills to ensure you're not overpaying for everyday services, from energy and health insurance to mobile phone plans. "Finder has a Financial Fitness Challenge that runs through this process, where the average person without a home loan can save around $4,000 per year by comparing their household bills and getting a better deal," said Ms Megginson.
Time Business News
30-04-2025
- Business
- Time Business News
No Deposit Home Loans in Melbourne: A Gateway to Home Ownership
In Melbourne, as in most other areas of Australia, the hope of becoming a homeowner is instead met with a significant barrier—getting a deposit. Saving up for a 20% deposit on a home can feel prohibitive, particularly to first-home buyers, younger professionals, or those seeking to begin afresh. This is where no deposit home loans Melbourne step in, providing a different path to homeownership without requiring out-of-pocket savings. In this article, we'll get deep into what no deposit home loans are, how they function, the advantages and disadvantages, and most importantly, how they can make your dream of becoming a homeowner in Melbourne possible without requiring you to pay a big deposit. No deposit home loans, as the name indicates, are loans in which the borrower is not required to pay a cash deposit. Rather, the whole purchase amount of the property can be financed through the loan. This is a major shift from the conventional home loan format, in which a deposit must be paid to secure the loan. Though no deposit home loans can provide an easier path to homeownership, they have some conditions and considerations. Such loans are generally meant for buyers who have a good credit history, stable income, and other financial benefits that qualify them for this type of lending. In a conventional mortgage deal, there is a deposit demanded by lenders, typically 10% to 20% of the value of the property, to cover themselves against the risk of lending money. In no deposit home loans, the lender funds the entire amount of the loan. This can be life-altering for people finding it difficult to accumulate cash for a conventional deposit. Yet, lenders will not typically make these loans without security. The borrower may often have to produce alternatives including: Guarantors: A friend, relative, or parent who has property can often be a guarantor and put their own home or possessions up to guarantee the loan for the borrower. Lender's Mortgage Insurance (LMI): In certain situations, the lender can insist that the borrower pay for LMI, which covers the lender if the borrower defaults on the loan. Although this can increase the total cost of the loan, it can simplify the process of obtaining a home. No deposit home loans are generally provided by some lenders that are ready to bear a greater amount of risk for the possible rewards of having a long-term relationship with the borrower. This makes them an excellent choice for borrowers with good financial position but no or insufficient savings. Access to Homeownership Sooner : The most significant advantage of no deposit home loans is the ability to purchase a home without needing to save a large deposit. This is particularly helpful for first-time homebuyers who might find it difficult to save the traditional 20% deposit. Chance for Property Appreciation: Melbourne's property market has always seen long-term appreciation, and buying a home with no deposit allows buyers to begin accumulating equity immediately, gaining from any subsequent rise in property value. Less Pressure on Savings: Rather than waiting years to save for a deposit, no deposit loans enable homebuyers to concentrate on servicing their mortgage repayments, thus making the move into homeownership easier and quicker. Guarantor Support: For those who have a close family network, a guarantor is able to minimize the necessity of a deposit without rendering the home loan impossible. This can be an ideal setup for those who have members of their family who are willing to act as a guarantor. Although no deposit home loans are spread with many benefits, it is crucial to look at the possible disadvantages before one settle for one. Higher Interest Rates : Higher interest rates can be charged on no deposit loans by lenders because the risk they incur by not accepting a deposit is higher. This raises the total cost of the loan over the long term. Lender's Mortgage Insurance (LMI): If you have to pay LMI, this will be an extra expense on top of your usual loan repayments. LMI can cost thousands of dollars to the price of your loan, so it is a serious financial undertaking. Possible Financial Burden: Without a deposit, the overall loan value is typically greater, and this translates to higher monthly payments. Depending on your financial position, this might put a burden on your finances, particularly if interest rates increase over time. Limited Availability : It is not all lenders who have no deposit home loans, and those who do might have strict conditions for eligibility. One should shop around and get a lender with competitive terms that suit their financial situation. Mostly, eligibility for no deposit home loans relies on various factors: Credit History: Good credit history is important to qualify for a no deposit loan. The lender wants to know if you have paid your bills in the past on time and will be able to service a high loan. Good credit history is important to qualify for a no deposit loan. The lender wants to know if you have paid your bills in the past on time and will be able to service a high loan. Income Stability: The lenders will seek out borrowers with a stable, secure income to The lenders will seek out borrowers with a stable, secure income to Guarantors or Co-borrowers : As stated, a guarantor or co-borrower may be required to qualify for a no deposit loan, especially if the borrower has little credit history or other financial resources. While no deposit home loans can be a thrilling chance for those who want to own their first home, they're not for everybody. Be sure to consider the possible risks and benefits carefully. If you are looking at this as an option, make sure you talk to a mortgage broker or financial planner to determine if a no deposit home loan is appropriate for your financial circumstances. They can assist you in comparing various loan products, learning about the fees involved, and ensuring that you're making a well-informed choice. No deposit house loans provide a possible route to homeownership for those who do not necessarily have the savings available for a conventional deposit. Whilst these loans provide instant entry into the property market, they also present their own set of problems, such as increased cost, increased interest charges, and possibly increased financial burden. But for the correct applicant, a no deposit home loan is a useful instrument in making that dream of owning a home in Melbourne a reality. Always do your homework, get professional advice, and ensure you have a clear understanding of the financial obligation before leaping in. TIME BUSINESS NEWS
