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Buying a first home as a long-term renter requires persistence, planning, and a willingness to leverage available resources, writes Victorian regional manager at Little Real Estate, Stephen Ericksen.
For many long-term renters, the dream of home ownership can feel increasingly out of reach. With rising property prices, the widening deposit gap, and the challenge of saving while paying rent, buying a first home seems daunting.
However, with strategic planning, financial discipline, and knowledge of available support schemes, it is still possible to transition from renting to owning.
Home ownership was once considered an achievable goal for the average Australian household. In the 1950s and ’60s, the house price-to-income ratio was around 3–4, meaning a home typically cost three to four times the average annual earnings. It was common for buyers to secure a home loan without a substantial deposit.
Fast forward to today, and the scenario is vastly different. The national dwelling value-to-income ratio hit a record high of 8 in 2024, and the average time to save for a deposit increased to 10.6 years.
Despite these challenges, purchasing a home is still within reach for long-term renters. The key is to approach the process with a strategic mindset and take advantage of government assistance programs, smart savings strategies, and alternative financing options.
Step 1: Set a clear savings goal
Before diving into the home-buying process, it is crucial to set a realistic savings goal. Consider the following factors:
- Property price range: Research affordable suburbs and property types that fit your budget.
- Deposit size: Aim for at least 10–20 per cent of the property value to secure better loan terms and avoid lenders mortgage insurance (LMI).
- Additional costs: Factor in stamp duty, legal fees, moving costs, and ongoing home ownership expenses.
Step 2: Build your deposit faster
Saving for a deposit while paying rent is one of the biggest hurdles for renters. However, a few strategic moves can help accelerate the process:
- First home super saver scheme (FHSSS): This government initiative allows individuals to make voluntary contributions to their superannuation fund, which can later be withdrawn for a home deposit. The tax benefits make this a great way to save faster.
- Automatic salary deductions: Setting up direct deposits into a separate high-interest savings account can help maintain discipline.
- Reduce unnecessary expenses: Small lifestyle changes, such as cutting back on dining out and subscription services, can lead to significant savings over time.
- Leverage COVID-era savings: Some renters found they saved more during the pandemic due to reduced entertainment and travel expenses. Channel any remaining savings towards your deposit.
Step 3: Explore government support and grants
Many first home buyers are unaware of the financial assistance available to them. Some key programs include:
- First Home Owner Grant (FHOG): Offers a one-time grant to eligible buyers purchasing new properties.
- Stamp Duty Concessions: In Victoria, first home buyers purchasing properties under $600,000 can save over $30,000 in stamp duty costs.
- Home Guarantee Scheme (HGS): Allows eligible first home buyers to purchase a property with as little as a 5 per cent deposit while avoiding costly LMI fees.
Step 4: Consider alternative property options
With housing affordability being a challenge, renters may need to explore alternative property choices.
- Apartments over houses: Opting for an apartment rather than a standalone house can significantly reduce costs, especially in high-demand areas.
- Up-and-coming suburbs: Research areas with strong growth potential where prices are still reasonable.
- Co-buying: Partnering with a trusted friend or family member can make ownership more affordable.
- Rentvesting: Buying an investment property in an affordable location while continuing to rent in a preferred area can help build equity.
Step 5: Secure a loan with the right lender
Finding the right lender is crucial for first home buyers. Steps to improve borrowing capacity include:
- Improving your credit score: Ensure timely bill payments and reduce outstanding debts.
- Avoiding large financial commitments: Minimise car loans and credit card debt to improve loan eligibility.
- Comparing lenders: Different lenders offer varying interest rates and incentives for first home buyers. Shopping around can lead to better loan terms.
Buying a first home as a long-term renter requires persistence, planning, and a willingness to leverage available resources.
While the deposit gap and rising prices present challenges, strategic financial moves, government assistance, and a well-thought-out savings plan can turn home ownership from a distant dream into reality.
By following these steps, long-term renters can take control of their financial future and achieve the stability of owning a home.
Stephen Ericksen is the Victorian regional manager at Little Real Estate.
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