When lenders look at finance applications, there are differences in their approach depending on whether the potential buyer is looking to purchase anversus buying a property to live in. One of the most tried and tested ways to get into the property market as an investor is to buy as an owner-occupier and then turn that property into an investment. The advantages of doing this are that the barriers to entry into your first property are far lower.
Advantages of Buying as an Owner Occupier
The first significant advantage of buying as an owner-occupier is that you can be eligible to pay low or no stamp duty. In most cases, it is possible to get the First Homeowners Grant. If you meet specific requirements, you can claim a first home concession for transfer duty when acquiring your first residence. However, some requirements regarding this scheme differ fromto state within Australia. Check on your local government website for more information. Lenders’ Mortgage Insurance (LMI) is the other big-ticket issue for property buyers. LMI applies to loans where the purchaser wishes to take out a loan with less than a 20% deposit saved. This fee is quite costly and can often cost tens of thousands.
A way to avoid this is to use a guarantor loan, which in most cases involves parents, who effectively put up equity in their own home so that you can use it as a deposit. Getting a 100% loan is sometimes possible, meaning no money is deposited. However, these are rare as they are considered a much
To access these loans and incentives, you must as an owner-occupier for 12 months after purchasing the property. Afterward, you can move out and . If you are buying in a high-growth area, you might even see an equity uplift that you can access to buy your next property.
Lenders like to see savings as it suggests you manage money well. When you buy a property, lenders look at your savings and how much you can afford to borrow based on your income and expenses. However, each lender analyses these savings differently. Some lenders might consider those genuine savings if you take out a large personal loan to cover stamp duty and a deposit and leave that money in your account for three months. Assuming you can service what would effectively be a 105% LVR, this could be a strategy that could work for people in some circumstances.
It’s possible to buy apartments or homes off the plan, and because the property will not be built for some time, you might onlyto pay the initial deposit upfront. While this is typically something like 10%, this will still be lower than other . Stamp duty can sometimes be delayed (or exempt), but it’s essential to check on a state-by-state level.