The Pros and Cons of Buying a Unit as Your First Home

Understanding Unit Ownership for First Home Buyers

Buying your first home is a significant milestone, and for many Perth residents, purchasing a unit represents an accessible entry point into the property market. Units often require a smaller deposit than houses and can offer a more affordable path to homeownership. However, understanding both the advantages and potential drawbacks is crucial when making this important decision.

The Advantages of Purchasing a Unit

Lower Entry Costs

Units typically have a lower purchase price compared to houses in similar locations, making them attractive for those applying for a home loan for the first time. This lower loan amount often means reduced stamp duty costs and potentially avoiding lenders mortgage insurance (LMI) if you can achieve a favourable loan to value ratio (LVR).

Location Benefits

Units are often located closer to city centres, public transport, and amenities. For Perth and West Perth residents, this can mean shorter commutes and access to urban conveniences that might be financially out of reach when buying a house in the same area.

Maintenance Considerations

Many external maintenance responsibilities fall to the body corporate, which can be appealing for first-time buyers who may not have extensive home maintenance experience or the time to manage these tasks.

Access to Amenities

Modern unit complexes often include shared facilities such as gyms, pools, or gardens that would be expensive to install and maintain in a standalone property.

The Challenges to Consider

Body Corporate Fees

Unit ownership involves ongoing body corporate or strata fees that cover building maintenance, insurance, and shared facility costs. These fees should be factored into your borrowing capacity calculations and ongoing financial planning.

Limited Control Over Property Decisions

Major building decisions require body corporate approval, which can limit your ability to modify or improve your property according to personal preferences.

Potential for Capital Growth Limitations

While not universal, units may experience slower capital growth compared to houses, particularly in established areas where land value appreciation drives property price increases.

Noise and Privacy Considerations

Shared walls and close proximity to neighbours can impact privacy and noise levels, which may not suit all lifestyle preferences.

Financial Considerations and Support Available

First home buyers purchasing units can access various government incentives and schemes:

• First home owner grants (FHOG): Available for eligible first-time buyers
• Home Guarantee Scheme: Allows purchase with as little as 5% deposit
• First time home buyer programs: Various state and federal initiatives
• Stamp duty concessions: Potential savings on transaction costs

When you get pre-approved for your first Home Loan, lenders will assess your financial situation, including your ability to service both the mortgage and ongoing unit expenses. Having access Home Loan options from banks and lenders across Australia through a mortgage broker can help you compare packages and find suitable interest rate discounts.

Interest Rate Options and Loan Features

Units are eligible for the same loan products as houses, including:

• Variable interest rate loans with flexible repayment options
• Fixed interest rate loans for payment certainty
• Offset account facilities to reduce interest charges
• Interest rate packages that may include fee waivers

The application process involves providing bank statements and documentation of your financial position. Professional mortgage brokers can access to banks and lenders nationwide, streamlining application process and helping identify the most suitable loan products.

Making the Right Choice for Your Situation

When deciding whether to apply for a home loan for a unit purchase, consider:

1. Your long-term lifestyle goals and space requirements
2. The specific location and its growth potential
3. The body corporate's financial health and fee structure
4. Your ability to service both mortgage repayments and ongoing unit costs
5. Whether the property could serve as your first investment property if you later move

For those considering investment loan options, units can offer rental yield advantages due to their typically lower purchase prices and strong rental demand in well-located areas.

Professional Guidance for Your Property Journey

The decision to purchase a unit as your first home involves weighing multiple factors specific to your financial situation and lifestyle preferences. Professional advice can help you understand your borrowing capacity, explore available first time home buyer schemes, and identify properties that align with your long-term goals.

Mortgage brokers can provide valuable insights into the current property market conditions and help structure your home loan to maximise benefits while minimising costs. They can also assist with investment loan application processes if you're considering the property's future investment potential.

Call one of our team or book an appointment at a time that works for you to discuss your first home purchase options and explore the most suitable financing solutions for your circumstances.