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There is never ending media hype when it comes to the property market and affordable housing. As a first home buyer, it can be hard to ignore and many are stuck in a rental rut.

There is never ending media hype when it comes to the property market and affordable housing.

As a first home buyer, it can be hard to ignore the headlines and many are stuck in a rental rut.

According to the Housing Sentiment Report, 30% of renters have been in the rental market for over five years, with housing affordability being one of the major reasons for not purchasing (Genworth Homebuyer Confidence Index, March 2014). The other top barriers for purchasing a first home are:

• The difficulty of saving for a deposit (23%)

• Uncertainty about future employment (11%)

• Difficulty of making mortgage repayments (9%)

• Uncertainty about the economy (6%)

The goal of home ownership is still out of reach for many renters, so how can first home buyers get out of this rental rut?

Tips for getting out of the rental rut

Buy an investment property first

Even if your dream property is currently out of reach, it doesn’t mean you can’t dip your toes into the property market. Buying a first property as an investment can have long term benefits like taking advantage of capital gains prior to being able to purchase a home of your own.

The type of property purchased will be more geared towards investment. It may be easier to find as location doesn't have to be where you want to live. It may also be cheaper as well. You can direct your savings towards making the loan repayments, always ensuring you don't over-commit. This way you could continue living at home or sharing an apartment close to the city with your friends. 

Research by realestateview.com.au has revealed that 44% of those who bought investment properties did so as they make more money from the rent income and/or negative gearing benefits.

Use a guarantor

The most common type of guarantor for mortgage lending is a security guarantor. Instead of a family member giving a gift to help out, the guarantor allows equity in a property they own. If you are struggling to save the full deposit, this may be a way of getting your own home sooner as it may mean that the deposit required is dramatically reduced. The additional property helps bring the loan to under 80% LVR, which means that you may not have to pay lenders mortgage insurance either.

However, there are certain risks for the guarantor. If you default on your home loan or are unable to repay it, the guarantor is responsible for repaying the loan. So, make sure both parties enter into this agreement having sought the relevant legal and financial advice to ensure that they know exactly what the risks are.

Re-think prospects

With property prices continuing to increase and demand for housing not slowing down, you may find that your dream property may not be within reach for a while. But remember, even though purchasing your first home is a major achievement, the chances of you staying in your first home for forever is not very likely. You may find that moving to a less affordable area or smaller property, can put you in a better financial position and set you on the path towards a better future.

Pull out all stops to save for the deposit

While many first home buyers struggle to save while paying rent, others think outside the square to turbo charge their savings. Savings strategies range from moving back in with parents, taking in a boarder, getting a second job to starting a part time business. We would be interested to hear about successful saving strategies. Email them info@statecustodians.com.au and we can add yours to our list.

There is no easy solution or quick fix but being creative may mean that your dream of home ownership may be closer than you think.