How to buy a home and start investing in property

Once upon a time, every Australian might have had their eyes on the nuclear family with two and a half children and the house with the red door. Nowadays, many people look a bit further than this.

Building a savings account and generating wealth for the future is just as important as securing the right home. So, how can people get into property and investment in today’s tough economic conditions? 

Use the available grants

One thing to remember when buying your own home is you don’t have to go it alone. First-home-owner grants are available in every state and territory, and can help you put together a deposit if you are purchasing or constructing a new home. It’s a good way to get a head start on your funds.

Here is how much you could claim in certain states and territories.

• Up to $10,000 in Western Australia and Victoria
• Up to $12,500 in the ACT
• Up to $15,000 in Queensland, South Australia and New South Wales
• Up to $20,000 in Tasmania
• Up to $26,000 in the Northern Territory

With different guidelines between each part of Australia, it’s crucial to do some research. There can even be further funding available; for example, a $21,330 off-the-plan concession available in SA. Factor this grant into your first home savings plans. 

Non-traditional home loans 

Another way to secure a home loan could be to look outside the traditional lending box at mortgages that require lower deposits. Of course, you will then run the risk of incurring lenders mortgage insurance (LMI) and perhaps face higher interest rates.

A home loan calculator is an excellent way to compare different types of lending and whether they could be a sustainable way for you to save money in the short term when purchasing a property. But beware, the long-term financial health of your savings account should be kept in mind at all times. 

Getting a guarantor

One option that many people employ is the use of a guarantor on their home loan. As the NSW Office of Fair Trading notes, “a friend or family member may be willing to guarantee the loan”. This means they will be responsible for the debt if you fail to make repayments, so a great deal of trust is required.

Parents are often guarantors for home loans, sometimes even using security from their existing home. It’s one option for those looking to kick start their own real estate journey.

Use your equity

No matter how you get a foothold in the real estate market, once you begin paying off the home loan on your first home you are consistently growing in power as an investor. This is because what you pay off, in addition to any boost in your home’s value, can be used as leverage to purchase an investment property down the line.

One way many people enhance this situation is by making their first home an investment property, renting it out while renting their own home elsewhere. This may preclude you from some first-home-owner grants, but could be a stable financial setup affording you the chance to live wherever you like without worrying about central city property prices.

Whatever path you decide to take, the right research, savings account planning and financial advice will be key steps.  

Compare home loans in Australia