Today, I went and spoke to the bank about a home loan after working out it would only cost us a couple of hundred of extra dollars a month to be paying off our mortgage instead of paying rent.
And I found out we are a lot further away from buying a house than I thought.
Now I don’t know about you, but I’d heard a lot of rumours about getting a home loan that kind of had me thinking I’d be walking out of there with a fat debt and and an opportunity to make a house our forever home.
Yup, so that didn’t happen!
Here’s the deal- most banks will loan you up to 95% of the house price, which is pretty generous if you ask me.
So I was under the impression that for a house of $500,000 we’d need to have a cool $25,000 in the bank. Yup, it’s a hunk of cash but doable.
But that’s not the case at all.
There’s a catch.
Once you have your deposit, you also have to have your stamp duty. If you’re a first home buyer like us, you’ll get 40% of that deposit back. But here’s the thing, you actually have to have 100% of the amount and then our generous ol’ government will refund you the deposit.
Yup. Okay, ‘sometimes’ they accept just the 60% BUT in the 3 years my broker has been in the business she’s only seen that happen once.
So now this 5% deposit is up to $51,557- with a refund of approximately 10k coming your way.
Starting to seem a bit further away for you? Us too.
But wait, there’s more!
When borrowing over 20% of the purchase price, you need to purchase a little thing called lenders mortgage insurance(LMI). I’d heard of it, but I didn’t fully grasp it.
On the day of settlement, you need to have 100% of your LMI. You cannot include that amount in your home loan, you have to have cash on the day. And for a loan of $500,000 that’s a cool $16,234.62 extra.
In the words of my husband, “Dayum!”
$25,000 seems so minimal now compared to the odd $68,000 actually required to get into the housing market.
Alas, we’ll keep chipping away and one day (in the not to distant future I hope) we’ll make our Australian dream come true!
How did you ‘chip’ your way into the housing market?
*please note I’m not an expert! We’re just young family trying to do as much research before we buy our first home- and sharing what we learn along the way.