Why Units Appeal to First Home Buyers
When you're buying your first home, units often present an attractive entry point into the property market. They typically come with a lower price tag than houses, which means you might need a smaller deposit and could have lower ongoing costs. For many first home buyers, a unit offers the perfect balance between affordability and location, letting you live closer to work, cafes, and public transport without stretching your first home buyer budget beyond its limits.
Units also come with strata management, which handles building maintenance and common area upkeep. While you'll pay body corporate fees for this service, it means you won't need to worry about replacing the roof or maintaining the building's exterior yourself.
Understanding Your First Home Buyer Eligibility
Before you start unit hunting, it's worth understanding what makes you eligible for various first home buyer schemes. Generally, you'll need to be an Australian citizen or permanent resident, at least 18 years old, and purchasing your first property to live in as your primary residence.
The property value limits vary by state and scheme, but units often fall comfortably within these thresholds. This is particularly relevant when considering first home owner grants (FHOG) and first home buyer stamp duty concessions, which can save you thousands of dollars.
Some schemes you might qualify for include:
- The First Home Loan Deposit Scheme, which helps eligible buyers purchase with a 5% deposit without paying Lenders Mortgage Insurance (LMI)
- The Regional First Home Buyer Guarantee for properties in regional areas
- State-based first home buyer grants and stamp duty concessions
- The First Home Super Saver Scheme, which lets you save through your super fund
Low Deposit Options for Unit Purchases
One of the biggest hurdles for first home buyers is saving a deposit. Traditionally, lenders prefer a 20% deposit, but there are several low deposit options available that make purchasing a unit more achievable sooner.
With a 10% deposit, you can access many home loan options, though you'll typically need to pay Lenders Mortgage Insurance (LMI). This insurance protects the lender if you default on your loan, and while it adds to your upfront costs, it allows you to enter the market sooner.
The First Home Loan Deposit Scheme takes this further by allowing eligible buyers to purchase with just a 5% deposit while the government guarantees the remaining 15%. This means you can avoid LMI entirely, potentially saving tens of thousands of dollars.
Don't forget that some lenders also accept a gift deposit from family members, which can help you reach your deposit goal faster. Just make sure any gifted funds are properly documented for your first home loan application.
Home Loan Options When Buying a Unit
When you apply for a home loan to purchase a unit, you'll encounter various products designed to suit different circumstances. Understanding your options helps you make an informed decision that aligns with your financial situation.
Your main choice will be between a variable interest rate and a fixed interest rate. A variable interest rate moves up and down with the market, which means your repayments can change. The upside is that you might benefit from rate cuts and usually have access to features like an offset account or redraw facility.
A fixed interest rate locks in your rate for a set period (usually one to five years), giving you certainty about your repayments. This can help with budgeting when you're adjusting to homeownership costs. Some buyers choose to split their loan, fixing part and keeping part variable.
An offset account can be particularly valuable. It's a transaction account linked to your home loan where the balance offsets the interest you pay. For example, if you have a $400,000 loan and $20,000 in your offset account, you only pay interest on $380,000.
Redraw facilities let you access any extra repayments you've made, providing flexibility if unexpected expenses arise. However, check the terms as some lenders charge fees or have minimum redraw amounts.
Special Considerations for Unit Purchases
When you're getting pre-approval or submitting your home loan application for a unit, lenders assess the property differently than they would a house. They'll look at factors like:
- Body corporate financial health and management
- The building's condition and age
- Owner-occupier versus investor ratio
- Parking and storage allocation
- Rental yield potential
Some lenders are cautious about high-rise developments or buildings with a high percentage of investor-owned units. Others have restrictions on minimum unit sizes or won't lend on properties above a certain floor level. This is why working with a mortgage broker who understands these nuances can be valuable when you're navigating your first home buyers journey.
You'll also want to review the strata report carefully. This document reveals potential issues like upcoming special levies, building defects, or disputes between owners. Your solicitor or conveyancer should examine this thoroughly before you commit.
Your First Home Buyer Checklist
To keep your unit purchase on track, follow this first home buyer checklist:
- Assess your finances and determine your borrowing capacity
- Research available first home buyer grants and stamp duty concessions in your state
- Save your deposit (including costs for stamp duty, legal fees, and inspections)
- Get pre-approval for your first home loan to understand your budget
- Start viewing units and researching body corporate records
- Make an offer and arrange building and pest inspections
- Review the contract of sale and strata report with your solicitor
- Submit your formal home loan application
- Arrange building insurance and contents insurance (through insurance providers)
- Complete settlement and receive your keys
Getting Interest Rate Discounts
Many lenders offer interest rate discounts to first home buyers or those who meet certain criteria. These discounts might be available if you:
- Work in specific professions (healthcare, education, emergency services)
- Have existing accounts with the lender
- Purchase through a mortgage broker
- Maintain a high loan-to-value ratio
- Set up automatic repayments
Even a small reduction in your interest rate can save you thousands over the life of your first home loan, so it's worth investigating what discounts you might qualify for.
Making Your Application Stronger
When you apply for a home loan, lenders assess your ability to repay the loan. You can strengthen your first home loan application by:
- Maintaining regular savings habits
- Reducing credit card limits
- Avoiding multiple credit enquiries
- Having stable employment
- Being honest about your expenses
- Paying bills on time
A mortgage broker can review your situation and provide guidance on improving your application before submission, potentially increasing your chances of approval and securing more favourable terms.
Purchasing a unit as your first home is an exciting milestone. With the right preparation, understanding of home loan options, and awareness of the schemes available to first home buyers, you can make informed decisions that set you up for long-term success.
Whether you're exploring low deposit options, trying to understand your borrowing capacity, or wondering about interest rate choices, having expert guidance makes the process much smoother. Call one of our team or book an appointment at a time that works for you, and we'll help you turn your unit ownership dreams into reality.
