Lino Pelaccia: Helping first-timers into a home

ME's general manager broker sales on ways FHBs have a fighting chance to get on the ladder

High house prices are making it challenging for first home buyers to get a foothold on the property ladder.

So it’s important to think outside the box and explore new ways of buying a first home with your first home buyer clients.

Start small: their first home doesn’t have to be their dream home.

As a first homebuyer, it pays to be flexible, and compromise can be the secret sauce that lets them afford a home of their own. It’s all about getting a foothold in the market. They can upgrade later when they’ve built up their home equity.

Rentvesting
Here‘s something your first home buyers may not have considered – making their first property a rental investment rather than a home to live in. As one in ten first homebuyers are discovering, it’s a strategy with plenty of potential. The rental income and potential tax savings of negative gearing can make the loan repayments more manageable, and buying as a rentvestor opens up affordable locations first home buyers may not have considered as an owner occupier.

Co-buying between friends and siblings
According to ME, 14% of first home buyers have purchased jointly with a family member. By pooling resources, buyers can afford a better quality property or a more desirable location. Running costs like rates and insurance can also be shared. That said, it pays for your first home buyer clients to think long term. Rather than hoping everything will work out, it’s worth recommending a solicitor to draft a co-ownership agreement that addresses all possibilities – including what will happen if one owner wants to sell up further down the track. Importantly, boomer parents acting as co-buyers need to have an exit strategy in place so they’re not left working for longer just to pay off their child’s home.

Family loans
According to ME, loans or gifts are the most common form of financial assistance, with 22% of first home buyers saying they received a gift or loan. In fact, the amount being loaned or gifted between family members to buy property has risen to $42,000 within the last five years. Sure, not all families have that sort of spare cash available. But even where they do, it pays to be aware that lenders still need to be confident the home buyer can manage their regular home loan repayments.

Lino Pelaccia is general manager broker sales at ME.

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