How to Buy a Two Bedroom Home in Grafton as a First Buyer

A two bedroom home in Grafton can be a workable first purchase when you line up the right schemes before you make an offer.

The schemes you can use depend on whether the property is new or established, how much you have saved and how much you earn. Getting those answers early shapes your search and your first home buyer budget.

How Much Stamp Duty Do First Home Buyers Pay in NSW?

In NSW, first home buyers pay no transfer duty on a home valued at $800,000 or less. A reduced rate applies above $800,000 and below $1,000,000, and no concession applies at $1,000,000 or more. These thresholds apply to contracts exchanged on or after 1 July 2023.

For most two bedroom properties, that means stamp duty is unlikely to be a cost. The concession covers new and existing homes, and vacant land has lower thresholds. Neither you nor your partner can have owned residential property in Australia before. You must also move in within 12 months of settlement and live there for at least 12 continuous months. Your solicitor or conveyancer claims the concession for you, as it is not applied automatically.

The $10,000 NSW first home owner grant is a different matter. It applies only to newly built, off-the-plan or substantially renovated homes with a purchase price of $600,000 or less. It is not available for established homes, so a second-hand two bedroom unit or cottage will not attract it.

Can You Buy in Grafton With a 5% Deposit and Avoid LMI?

Yes, eligible first home buyers can buy with a 5% deposit under the Australian Government 5% Deposit Scheme, and Lenders Mortgage Insurance (LMI) is not payable. Housing Australia backs the lender for the part of the loan between your deposit and 20% of the property value. There are no income caps. You must be an Australian citizen or permanent resident aged 18 or over, and you must move in within six months of settlement.

Housing Australia names Coffs Harbour-Grafton as a regional centre for its price caps. The exact cap for a property depends on its suburb and postcode in Housing Australia's postcode search tool, so check the address before you commit. You apply through a participating lender, and a broker can guide you through that.

The trade-off is a larger loan. A smaller deposit means higher repayments over the life of the loan.

As an example, consider a couple buying a two bedroom unit in Grafton with a 5% deposit and a $500,000 loan. At an illustrative rate of 6.75% p.a. over 30 years, repayments would be about $3,243 a month, or roughly $1,621 each. They have their pre-approval reviewed against their budget and find the repayments fit comfortably alongside their other costs. They proceed under the scheme with no LMI added to the loan. At that loan size the price sits well under the $800,000 stamp duty exemption threshold. The result is a manageable loan, no LMI and no duty to find at settlement. You can test your own numbers with a repayment calculator or with one of our brokers.

Is Help to Buy Worth Considering for a Two Bedroom Home?

Help to Buy suits buyers who can afford a small deposit and repayments but cannot reach a full loan on their own. The Australian Government contributes between 5% and 30% of the price of an existing home, and between 5% and 40% of a new home, in exchange for an equity share. You pay no interest or rent on that share, and your deposit must be at least 2% of the price from savings.

Income limits apply. At the time of writing, the threshold is $103,000 for a single applicant and $165,000 for joint applicants, and Housing Australia indexes these each 1 July. A lender will also test whether you could buy using your savings and borrowing capacity alone, and you cannot use Help to Buy if you can.

The cost is that the government shares in the home's value, whether it rises or falls. Housing Australia reviews your income at least every five years, and you may need to buy back part of its share if your income stays above the threshold. Buying it back costs you valuation and administration fees. Help to Buy cannot be combined with the 5% Deposit Scheme, so you need to choose one.

Can the First Home Super Saver Scheme Help Build Your Deposit?

The First Home Super Saver scheme lets you release voluntary super contributions towards a first home deposit. Up to $15,000 of voluntary contributions a year count towards release, to a total of $50,000. You can release the contributions plus associated earnings, and the ATO withholds tax on the amount released.

The trade-off is that your money stays in super until you request release, and you must request a determination from the ATO before you settle. If you do not sign a contract or recontribute within the time limits, extra tax applies. Each partner can use the scheme separately. The tax treatment depends on your circumstances, so speak to your accountant before you contribute.

Why Pre-Approval Should Come Before Inspections

Pre-approval tells you what you can borrow, so you can search for properties in your range. It also sets the ceiling for your two bedroom search before you fall for a place you cannot afford. If you plan to use Help to Buy, Housing Australia advises against paying a deposit or bidding at auction before you have conditional approval.

The lender looks at your income, savings, debts and living costs. Our borrowing capacity page explains how lenders assess these. Your broker can also compare home loans with features such as an offset account, which can reduce the interest you pay on a loan. Our first home buyers page covers more of the process.

If you are ready to talk numbers, call one of our team or book an appointment at a time that works for you. We will work through the schemes that apply to your situation and help you buy your first Grafton home with confidence.

Frequently Asked Questions