9 Secret Ways To Finance Your First Property

November 8, 2021
how to finance your first property

Sky-high property prices are pushing first-time buyers out of the market, according to the Australian Housing and Urban Research Institute. They state that almost one half of today’s youngsters won’t become property owners until they’re 54 years old. But this statistic can be taken with a pinch of salt, as it is possible to become a first-time homeowner when you know how.

1. Invest out of town

Property prices in Australia have increased by 20% in the past year, according to ABC News. Sydney, Hobart, and Canberra are some of the most expensive parts of Australia to buy property in. Over the past 5 years, Sydney prices have crept up by almost 30%, Hobart by 66%, and Canberra by 45%.

Investing in property out of town in regional parts of Australia can be a more affordable prospect. In the past year, prices have gone up by 12.5%, which is significantly less than in the main cities. Other benefits of buying your first home in regional Australia include a calmer and more enjoyable lifestyle and good amenities.

2. Wait before trying to finance your property

finance your first property by borrowing from friends

A further house price growth of 22% is expected during 2022. However, 9News predicts that they’ll start to fall again in 2023. For this reason, it may be financially best for you to sit and wait it out. Over the course of 2022, save up as much money as you can so you’ve got a good down payment behind you. You’ll typically need at least 5% of the value of the home you plan to buy.

But if you can save more, your monthly repayments will be less, thus making your property more affordable. During this period you can also do your homework on home loans. Some home loans have extra features which are often chargeable so think carefully about what it is you want. If you’re likely to want to make extra repayments, look into loans which don’t charge for this.

3. Borrow from loved ones

Digital Finance Analytics reports that 20% of Australians buy their first home using money from their parents. The average amount loaned is $70,000. There are pros and cons in using your parents’ cash to fund your property purchase.

Things to consider include whether your parents will charge interest and when and how they expect to be paid back. Make sure you all fully understand how the loan will affect you all. For example, will your parents be a co-borrower or a guarantor?

Some parents will give the money as a gift which is a big pro, but be sure this isn’t going to cause any tension among family members, such as siblings, further down the line. 

4. Buy a fixer upper

finance your first property with a fixer uppers
Soho Listing for $90,000 @ 2 Blackwood Avenue, Rosebery, TAS, 7470, Australia

In September 2021, the median price of a house in Australia was $666,514. This is a large sum of cash for any buyer, especially a first time one. A fixer upper is a property that requires a lot of work. The good thing about these is that you can spend out on them as and when you can afford to.

Fixer uppers are also a lot cheaper than a standard house, so it makes it easier to become a homeowner. Earlier this year a fixer upper in Thornton Street, Wellington was on the market for just under $60,000. You could even flip the property when renovations are complete, make a hefty profit, and invest in something bigger and better.

5. Finance your property with a joint venture

If you haven’t got a partner to buy a home with, it can be tough to financially afford a property. But, it’s not impossible. One way to do it is to go into a co-ownership arrangement with a friend or family member. The great thing about this set up is that you’re likely to have a bigger deposit, so your monthly fees will be lower.

You’ll also split everything such as your mortgage repayments, insurance, renovations, and legal fees, which makes the whole process much more affordable. If you go down this route, make sure you seek legal advice and have a legal document drawn up detailing how you will split your costs..

6. Go small

The Australian Bureau of Statistics states that the majority of homes in Australia have three bedrooms. With property prices so high right now, a three-bed property is a luxury that most first time buyers can’t afford. Instead of waiting for a home like this to come up within your budget, it’s best to opt for something a little smaller than you originally hoped.

Most first-time buyers don’t need excess bedrooms or bathrooms. While a large garden is nice, it can bump the price of a property up by as much as 25%. By scaling back your expectations and wants, you’re more likely to get your foot on the property ladder sooner rather than later.

7. Stop renting

finance your first property with room mates

This year has seen rental prices rise substantially. In July, it was reported that rent in regional areas had shot up by more than 11%. Meanwhile, renters in the city of Darwin were hit with rental hikes of 22%. If you dream of owning a home and are currently renting, you need to do whatever you can to get out of your rental property and reduce your costs.

Speak to your parents and see if they’ll let you move back in with them while you save hard for your own house. Or talk to friends and see if you can house share with them for a while.

Other options include house sitting or in-house pet sitting as these will provide you with a temporary place to stay. You could even think about getting a temporary job where accommodation is included such as in a holiday resort or hostel. 

8. Head to an auction

soho app live home auction

House auctions in Australia are gaining in popularity, partially due to the high cost of homes at present. In the second quarter of 2021, 31,605 homes were taken to auction across all of the capital states. As long as you’re careful at house auctions and take your time, you can land yourself a good bargain.

This is particularly the case when demand is low or when a seller urgently needs to get rid of their property. Auctions are also good as the whole transaction process usually takes just 4 weeks, which is faster than the average house sale.

But make sure you don’t get carried away with bidding. Always set yourself a limit and never go over it. For this reason, it’s worth going with a friend or family member who will stop you splashing out.

9. Request for the seller to finance the property

Believe it or not, some property sellers will lend you the money so you can buy their property. The downside of this arrangement is that you won’t get any equity or the deeds until you’ve paid the vendor back what you owe. But the advantages often outweigh this.

It’s a faster process as you haven’t got to wait for underwriters and mortgage applications. It’s also cheaper as there aren’t any bank fees or legal fees to pay. Just make sure your agreement is legally binding as this will protect both parties.

It’s becoming increasingly difficult for first time home buyers to secure a property in Australia. But it’s not impossible and there are some tried and tested ways to get your foot on the property ladder.

Keep yourself updated with useful tips like these by getting registered on Soho. Not only are we finding you your dream home, but we’re also helping you save for it and decorate it! So don’t forget to swipe on your property matches so we can get you there faster.

Soho is your expert team in Australian real estate, offering an innovative platform for effortless property searches. With deep insights into buying, renting, and market trends, we guide you to make informed decisions, whether it's your first home or exploring new suburbs.
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