Buying a Unit: The Ins and Outs for First Home Buyers

Why Units Make Sense for First Home Buyers

If you're looking at buying your first home, you've probably noticed that purchasing a unit can be more affordable than buying a house. For self-employed professionals and those wanting to grow their wealth through property, units offer an accessible entry point into the Australian property market.

Units typically require a smaller deposit and lower ongoing maintenance costs compared to standalone houses. This makes them particularly attractive when you're building your property portfolio or establishing yourself financially.

Understanding Your First Home Buyer Eligibility

Before you start searching for that perfect unit, it's important to know what first home buyer benefits you can access. Your first home buyer eligibility depends on several factors including:

• Whether you've owned property before (in Australia or overseas)
• Your income level and employment status
• The purchase price of the property
• Whether you'll live in the property as your primary residence

For self-employed buyers, demonstrating your income can require additional documentation. You'll typically need two years of tax returns and financial statements, though some lenders may work with less depending on your circumstances.

First Home Buyer Grants and Concessions

As a first home buyer purchasing a unit, you may be eligible for various government incentives:

First Home Owner Grant (FHOG)
Depending on your state or territory, you might qualify for first home owner grants when purchasing a new unit. The grant amounts and eligibility criteria vary by location.

Stamp Duty Concessions
First home buyer stamp duty concessions can save you thousands of dollars. These concessions often apply differently to units compared to houses, so it's worth understanding the specifics for your state.

First Home Loan Deposit Scheme
This scheme allows eligible first home buyers to purchase a property with a 5% deposit without paying Lenders Mortgage Insurance (LMI). The Regional First Home Buyer Guarantee offers similar benefits for properties in regional areas.

Home Loan Options for Unit Purchases

When you apply for a home loan to purchase a unit, you'll encounter several home loan options:

Interest Rate Choices

1. Variable interest rate: Your rate fluctuates with market conditions, offering flexibility with features like offset accounts and redraw facilities
2. Fixed interest rate: Lock in your rate for a set period (typically 1-5 years), providing certainty for budgeting
3. Split loans: Combine both variable and fixed portions

Many lenders offer interest rate discounts for first home buyers or those with larger deposits. Your mortgage broker can help you compare these options.

Deposit Requirements

Most lenders offer low deposit options:

• 5% deposit: Available through government schemes or with LMI
• 10% deposit: More lender options, though LMI usually applies
• 20% deposit: Avoid LMI and access better interest rates

You can also use a gift deposit from family members, though lenders have specific requirements around this.

Special Considerations When Buying a Unit

Units come with unique factors that affect your first home loan application:

Strata Fees
Lenders consider these ongoing costs when assessing your borrowing capacity. Higher strata fees can reduce how much you can borrow.

Building Reports
The condition of the unit complex matters. Lenders may decline loans for buildings with structural issues or insufficient sinking funds.

Owner-Occupier Ratios
Lenders prefer complexes where most units are owner-occupied rather than investment properties.

Your First Home Buyer Checklist

Before submitting your first home loan application, make sure you have:

• Saved your deposit plus additional funds for stamp duty and other costs
• Gathered employment documentation (especially important for self-employed buyers)
• Checked your credit score and addressed any issues
• Calculated your first home buyer budget including ongoing costs
• Obtained pre-approval to strengthen your negotiating position
• Researched the unit complex thoroughly
• Considered the First Home Super Saver Scheme to boost your deposit

The Application Process

When you're ready to apply for a home loan, the process typically involves:

1. Getting pre-approval to understand your budget
2. Finding your ideal unit
3. Making an offer (your pre-approval strengthens your position)
4. Submitting a full home loan application
5. Property valuation and building inspection
6. Formal loan approval
7. Settlement

For self-employed professionals, working with a specialist mortgage broker who understands your income structure can make the process more straightforward.

Offset Accounts and Redraw Facilities

These features can help you manage your first home loan more effectively:

• Offset account: A transaction account linked to your loan that reduces interest charged
• Redraw: Access to extra repayments you've made (useful for unexpected expenses)

These features are typically available with variable interest rate loans and can be particularly valuable for self-employed buyers who may have irregular income.

Growing Your Wealth Through Property

Purchasing your first unit isn't just about having somewhere to live - it's about building equity and establishing yourself in the property market. As you pay down your loan and the property potentially increases in value, you're creating a foundation for future investment loans and wealth creation.

Many successful property investors started with a modest unit purchase before expanding their portfolio. The key is making informed decisions and working with professionals who understand your goals.

Making It Happen

Buying your first unit involves many moving parts, from understanding first home buyer eligibility to choosing the right home loan options. For self-employed professionals, the process can feel more involved due to additional documentation requirements.

Working with experienced finance professionals who specialise in helping self-employed buyers can make a significant difference. They can help you access interest rate discounts, identify suitable low deposit options, and structure your loan to support your wealth-building goals.

Ready to take the next step towards owning your first unit? Call one of our team or book an appointment at a time that works for you at Makara Finance. We specialise in helping self-employed professionals and first home buyers turn their property goals into reality.