Home Loan Basics for Millennials
According to recent reports, many millennials have lost hope that they’ll ever be able to own a house. Just two years ago, ABC reported that “63 per cent of Australians who are still living with their parents say they cannot afford to move out of home.”
But that doesn’t need to be the case. Yes, it can be a daunting process to secure a home loan, but it’s not impossible. With some planning and some fact gathering, anyone can achieve their homeownership dreams.
The First Home Loan Deposit Scheme
For years, first-time buyers had to scrape together large deposits before they could get a loan, and then they had to pay a Lender’s Mortgage Insurance (LMI) fee. Because first-time buyers were considered a borrowing risk, the LMI protected the lender’s investment against default.
But assistance came in February 2021, when the Australian Government passed the First Home Loan Deposit Scheme (FHLDS). This new provision makes purchasing a home far more affordable by only requiring a 5% deposit from buyers. Now, someone looking for a $100,000 home needs only $5000 for a down payment.
Even better, the FHLDS waves the LMI requirement. These changes make buying a home easier than ever for millennials.
Preparing to Borrow
While the First Home Loan Deposit Scheme simplifies the process, it does not automatically grant a loan to everyone who wants one. Borrowers still need to demonstrate that they are not a risk to lenders.
Millennials can put themselves in the best position for a home loan by following these steps:
- Start a budget to pay down debts and set aside money in savings.
- Get a copy of your credit report and start addressing problem areas.
- Because lenders prefer to see consistent smaller deposits than random lump sums, get a job that offers a steady flow of income.
- Use our loan calculator to determine how much you can reasonably afford.
Ready to Get Started?
Obtaining a home loan can be daunting for first-time buyers, but you don’t have to go it alone. Contact Mortgage House today and we’ll be happy to get you started on the path toward homeownership.