First Home Buyers and Purchasing a Unit in Melbourne

Understanding Unit Purchases for First Home Buyers

Buying your first home is an exciting milestone, and for many first home buyers in Melbourne, purchasing a unit represents an achievable entry point into the property market. Units typically require a smaller deposit and lower purchase price compared to houses, making them an attractive option for those looking to establish themselves in the Melbourne property market.

When considering a unit purchase, it's important to understand the various home loan options available, government schemes designed specifically for first home buyers, and the unique considerations that apply when purchasing strata-titled property.

First Home Buyer Eligibility and Government Support

As a first home buyer, you may be eligible for several government incentives that can significantly reduce the upfront costs of purchasing a unit:

First Home Owner Grants (FHOG)
The Victorian government provides first home owner grants to eligible buyers purchasing a new property. These grants can provide substantial financial assistance, though eligibility criteria including property value caps and applicant income thresholds apply.

First Home Buyer Stamp Duty Concessions
Melbourne-based first home buyers may qualify for stamp duty concessions or exemptions on properties below certain value thresholds. These concessions can save thousands of dollars on your purchase, making unit ownership more accessible.

First Home Loan Deposit Scheme
The First Home Loan Deposit Scheme allows eligible first home buyers to purchase a property with as little as a 5% deposit without paying Lenders Mortgage Insurance (LMI). This scheme can be particularly valuable when purchasing a unit, as it reduces the initial capital required.

Regional First Home Buyer Guarantee
While focused on regional areas, this scheme offers similar benefits to the First Home Loan Deposit Scheme for properties located outside major metropolitan centres.

Low Deposit Options for Unit Purchases

One of the most significant barriers to home ownership is accumulating a sufficient deposit. Traditional lending typically requires a 20% deposit to avoid LMI, but several low deposit options exist for first home buyers:

• 5% deposit: Available through government schemes or selected lenders
• 10% deposit: A more common option with various lenders, though LMI typically applies
• Gift deposit: Family contributions can help boost your deposit, subject to lender requirements

When planning your first home buyer budget, remember to account for additional costs beyond the deposit, including:

• Stamp duty (if not eligible for full exemption)
• Legal and conveyancing fees
• Building and pest inspections
• Strata report fees
• Body corporate fees (ongoing)
• Council rates and utilities

Understanding Home Loan Application Requirements

Before you apply for a home loan, it's beneficial to understand what lenders will assess during your first home loan application:

1. Income verification: Payslips, tax returns, and employment contracts
2. Living expenses: Demonstration of your ability to manage repayments
3. Credit history: Your borrowing and repayment track record
4. Savings history: Evidence of genuine savings over time
5. Borrowing capacity: How much you can afford to repay

Obtaining pre-approval before you begin property hunting can provide clarity on your budget and strengthen your position when making an offer on a unit.

Interest Rate Options and Loan Features

When considering your first home loan, you'll need to choose between different interest rate structures:

Variable Interest Rate
A variable interest rate fluctuates with market conditions. Benefits include:

• Potential for interest rate discounts
• Access to features like offset accounts and redraw facilities
• Flexibility to make additional repayments without penalties

Fixed Interest Rate
A fixed interest rate remains constant for a set period, typically one to five years. This option provides:

• Certainty in repayment amounts
• Protection against rate increases
• Assistance with budgeting and financial planning

Many first home buyers choose a split loan, combining both fixed and variable portions to balance stability with flexibility.

Important Loan Features for First Home Buyers

Offset Account
An offset account is a transaction account linked to your home loan. The balance reduces the interest charged on your loan, potentially saving thousands over the loan term.

Redraw Facility
A redraw facility allows you to access additional repayments you've made above the minimum requirement, providing financial flexibility for unexpected expenses.

First Home Super Saver Scheme
This scheme allows you to save money for your deposit inside your superannuation fund, taking advantage of concessional tax treatment. You can withdraw these voluntary contributions, along with earnings, to put towards your first home purchase.

First Home Buyer Checklist for Unit Purchases

Before finalising your unit purchase, ensure you've completed these steps:

• Research and compare home loan options from multiple lenders
• Check your first home buyer eligibility for government schemes
• Obtain pre-approval to understand your borrowing capacity
• Review the strata report carefully, including body corporate financials
• Understand ongoing costs including body corporate fees
• Arrange building and pest inspections
• Review the owners corporation rules and by-laws
• Confirm parking and storage allocations
• Organise home loan insurance
• Finalise your home loan application with supporting documentation

Lenders Mortgage Insurance (LMI) Considerations

When purchasing with a deposit below 20%, lenders typically require LMI. This insurance protects the lender if you default on your loan. While LMI adds to your upfront costs, it shouldn't necessarily discourage you from purchasing with a smaller deposit, particularly if property prices are rising. Some government schemes eliminate this cost entirely for eligible first home buyers.

Working with OVM Finance Group

As Melbourne-based mortgage brokers, OVM Finance Group understands the unique challenges facing first home buyers purchasing units in Melbourne. Our team can assist you with:

• Comparing home loan options across multiple lenders
• Identifying the most suitable government schemes for your circumstances
• Structuring your loan to maximise features and minimise costs
• Guiding you through the first home loan application process
• Providing ongoing support throughout your home ownership journey

Call one of our team or book an appointment at a time that works for you to discuss your first home purchase plans.