The Victorian government recently announced that it will abolish stamp duty for first home buyers purchasing a property valued up to $600,000, while discounts will be available for homes valued between $600,000 to $750,000. This new rule took effect on the 1st of July 2017. And it will be applicable to both new and established homes.
What could this new scheme mean for you as a first home buyers?
It means savings of up to $15,535 in stamp duty (for a $600,000 property). It means that you can enter the property market with less deposit and thereby allowing you to own your dream home sooner.
A first home buyer in Melbourne purchasing a brand new property only needs to come up with the 5% genuine savings deposit and coupled with the $10,000 grant can purchase his/her dream home sooner. A First Home Buyer in Regional Victoria should still come up with the 5% genuine savings deposit but gets a higher grant of $20,000.
If your 5% deposit comes from a gift from your family, sale of an asset, bonus from work, a tax refund, sale of a car or an inheritance, you can still purchase your home today even if the three months savings has not been established yet. First home buyers who have been renting for more than six months with a licensed property manager will consider rental history as genuine savings. You only need to provide a rental statement or tenant’s ledger.
Properties first home buyers should avoid if they have very little deposit
There are now postcode restrictions for high-density and inner-city apartments in Melbourne particularly in the suburbs of Southbank, South Wharf, Docklands and Abbotsford. Where loan mortgage insurance is required in the loan application, it is important that you speak to a broker to verify if the address of the property will not have any issues at the time of settlement specially for off-the-plan purchases. A 20% deposit will reduce the risk for properties in this category.
The difficulty of saving for a deposit
With the median house price in Melbourne rising above $840,000, a growing number of first home buyers are scrimping and saving to secure a home loan. A newly-created property tool, the Smashed Avocado Index, shows that a Millennial first home buyer would have to skip breakfasts out for decades in order to save for the typical 20% deposit. If you really want to buy your own house, you must be prepared to sacrifice the things you want even if you have to skip your smashed avocado for breakfast.
This article is for general information only and should not be considered personal financial advice. Before making a financial decision, you should seek independent advice from a mortgage broker, financial planner or an accountant.
(Maria Papa is a senior finance expert specialising in home loans, investment loans, self-employed loans, Lo Doc loans, car loans, personal loans and loan protection. She has offices in Sydney and Melbourne. If you have questions, you can call Maria at 0430 144 008 or email her at firstname.lastname@example.org.)