Mark McGill is a multi-award winning leading industry expert in real estate and founder of The McGill Group.
Sometimes it feels like the world is against you and you will never have “The Great Australian Dream”, but the power to purchase your first property is in your hands. You just need to take both hands and place them over your ears to shut out the ‘noise’ about how impossible it is to achieve (and there’s a lot of that noise around)… and just go for it.
I say this with conviction and experience because I have bought and sold around eight properties between my late 20s and 30s.
I’ve also spent 11-years in the real estate industry, so it’s fair to say I have also helped hundreds of people do the same.
While I am not qualified to give financial advice, I am willing to share some of my own experience and insights to help break down some of the common barriers to home-ownership.
- You don’t need a HUGE deposit
You don’t always need a large deposit to purchase a property.
In fact, I’ve witnessed first homeowners purchase a property with just $10,000. Of course, this can’t happen without borrowing up to 95% of the purchase price but don’t let that scare you.
When I was 35-years-old, I purchased a two-bedroom unit with a $7,000 deposit, and I recently sold that property, in the middle of the pandemic for $100,000 more than I paid for it five years ago. So sometimes you need to look at the long game.
For full disclosure, the majority of my property purchases have been low deposit, and I’ve not once looked back. If I waited to save up a 20% deposit, I would never be where I am today.
- Lenders Mortgage Insurance (LMI) is not a deal-breaker… its a game-changer
What most first home purchasers don’t realise is LMI is applied to the life of the loan. You don’t have to pay it upfront, and it can fast track you into property ownership because you don’t have to wait to save a 20% deposit.
Sometimes the rise in value outweighs the additional insurance you are paying in the first place.
Let’s look at an example here:
The median property price in Australia is $549,918.
On a 95% loan, the deposit on the above property is $27,496
The LMI to secure the above would be $25,807.
Which means the total loan amount would be $548,299, which is just shy of the initial property price.
Over a 30-year term, on a 3% variable rate, your repayments would be $578 per month.
Interestingly the repayments end up being slightly less than the median rental price. So you end up in your own home, with no threat of rental increases and the benefit of capital growth.
LMI truly is a game-changer but not a solution in itself. You will need to be in good shape financially too.
- Look for ways to boost your income and trim the fat
A quick Google search will give you plenty of examples of how to save $25,000, but the best advice I can give you here is to look at ways to increase your earning potential.
I’ve never been much of a saver, but I have always found a way to make more money. During the Global Financial Crisis, I started freelancing as an architect on small jobs, and I also got into network marketing to supplement my full-time income.
I am not ashamed to admit that Amway helped get me along my way to becoming a property owner. These days there are certainly more options when starting a side-hustle within the gig economy, like Uber, Airtasker and Etsy – you have to be willing to do the extra work, but it will pay off when you get your deposit together.
One last piece of advice is to make some budget cuts. For me it was international travel, but with the pandemic, we’ve all been grounded anyway so you may as well take advantage of the opportunity to knuckle down.
The best way to get into owning your first home is to first own your mindset. You will see new opportunities open that weren’t even visible before!