Saving up for a mortgage is one of the biggest barriers to homeownership. As part of the federal election, Prime Minister Scott Morrison promised to address this by introducing a scheme which would help first home buyers by reducing the amount you have to save to secure a loan.
While in the past, most lenders have expected a 20 per cent deposit, with the new first home buyers’ scheme, eligible first home buyers with a five per cent deposit will be able to get a home loan without lenders mortgage insurance (LMI).
But how does it work, and how do you know if you qualify? We explain the ins and outs.
What is the first-home buyers’ scheme?
According to the financial comparison site Finder.com.au the scheme means, that if you have saved 5 per cent of the purchase price of your property, the government will guarantee the remaining 15 per cent of the deposit.
While you will still need to borrow 95 per cent, you will be able to avoid LMI, which is expensive, often totalling more than $10,000.
What is the major benefit?
Apart from removing the additional expense of LMI, the major benefit of the scheme is that it allows first home buyers to get into the property market sooner. It is much quicker to save for a 5 per cent deposit than a 20 per cent deposit, and if you are already saving, you may have already met your goal.
The scheme officially starts on 1 January 2020. And according to the National Housing Finance and Investment Corporation (who will manage the scheme in partnership with lenders), the government will also prioritise smaller lenders over the big banks to stimulate competition.
Who can use the scheme?
Access to the scheme is limited to 10,000 borrowers, according to the Guardian Australia, roughly one-in-10 of the 110,000 Australians who bought their first home in 2018.
There are also financial restrictions to be able to access it. Eligible first home buyers can't be earning more than $125,000 a year as a single or $200,000 as a couple.
What if I’m not eligible?
“If you’re not eligible for the first home buyers’ scheme but you are still keen to get into the property market, there are multiple support schemes that you can access at the state and territory level,” said Nick Boyd, Belle Property Head of Sales and Business Development.
Most state governments offer first-home owner grants, which is a grant of money that can be used towards your property or stamp duty concessions, whether that be waived or discounted stamp duty.
“Now is a good time to speak to the experts about what options you have. The market is in a stronger position, and there is plenty of stock available, so it’s an ideal time to consider your first move into property,” Nick says.
For more information, visit belleproperty.com