With the election results just in and the Coalition party having secured a majority government, there will be some changes ahead. Prime Minister Scott Morrison has introduced a new $500 million First Home Loan Deposit Scheme that will enable 10,000 first home buyers buy a home with only a five per cent deposit. Find out what you need to know as a first-home buyer.
First Home Loan Deposit Scheme
On May 12, the Liberal Party announced it would help first home buyers get “a significant leg up” with a scheme that would make available to them 95 per cent loan-to-value ratio mortgages.
Announcing the new loan scheme, Mr Morrison said: “It can take nine to 10 years for an average household to save a deposit. We want to help Australians realise the goal of buying their first home by cutting years off the time it takes to save up.”
Partnering with private lenders and smaller lenders to boost competition, the First Home Loan Deposit Scheme would be available to first home buyers who have saved a deposit of at least 5 per cent of the purchase price of a property they are considering buying.
The scheme – which would kick-off on 1 January 2020 - would cap first home buyers’ annual income up to $125,000 individually or $200,000 jointly as a couple. Prime Minister Scott Morrison also said that the value of homes purchased under the scheme would be determined on a regional basis reflecting the different property markets across Australia.
Once introduced, the scheme is set to help first home buyers who qualify with a saving of approximately $10,000 as they would no longer be required to pay lenders’ mortgage insurance (LMI).
Addressing issues in a practical way
The proposed scheme will help first home buyers fast-track their ability to get into the property market, cutting down the time needed to save a deposit and essentially doing away with LMI, a significant cost that first home buyers incur when they borrow more than 80 per cent of the property value.
Real Estate Institute of Australia (REIA) spokesperson, Adrian Kelly, said, “The scheme addresses two hurdles facing first home buyers – the deposit gap and transaction costs which include mortgage insurance – in a practical way," he said.
“The last time the federal government introduced a special measure for first home buyers was the First Home Buyers Boost during the GFC. This measure saw first home buyers, as a percentage of total loans financed, increase from 20.2 per cent in October 2008 to 31.4 per cent in May 2009.
“With first home buyers currently representing just 17.9 per cent of total housing loan approvals at the beginning of this year, the measure will be a timely boost not just for first home buyers but for the building sector and the economy in general. It is direct assistance like this rather than changes to negative gearing and capital gains tax which provide better outcomes for all,” Mr Kelly said.
Research your options
The Australian mortgage market is complex and competitive and with more changes ahead, it’s vital you’re working with someone who understands and can help you compare the various options available to you. Get in touch with a Mortgage Express broker to talk about your options and to help you find a home loan that matches your needs.
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