Maria Papa columnist

According to property experts, 2019 is the year of the first home buyers.  One of the biggest hurdles of first home buyers is coming up with a deposit for their first home. Just saving for the 20% deposit to avoid paying loan mortgage insurance will take 9 to 10 years for an average household. Some lenders require a minimum of 5% genuine savings deposit. But because of loan mortgage insurance, first home buyers need to come up with more funds to purchase a home.

A few days before the elections, the prime minister Scott Morrison announced a new First Home Loan Deposit Scheme that will enable first home buyers to access a mortgage with a 5% deposit.  Scott Morrison promised first home buyers they would only need a 5% deposit instead of the usual 20% deposit if the Coalition government gets re-elected. Mr Morrison said, “I want more Australians to be able to realise the dream of owning their own home”. 

Under this new scheme, the government would guarantee the additional amount needed to reach the 20% threshold. This would allow borrowers to avoid paying thousands of dollars in mortgage insurance. The program would be available to first home buyers with an income of up to $125,000 or couples with a joint income of up to $200,000. The scheme would commence from 01 January 2020.

Now that the Coalition has won, we expect the Prime Minister to keep his promise. It is estimated that the scheme would help first home buyers save around $10,000 by not having to pay lenders’ mortgage insurance.

Another way for first home buyers to save for a deposit is through the First Home Super Saver Scheme (FHSSS). The FHSSS was introduced by the Australian government in the Federal Budget 2017-2018 to help Australians save for their first home. Under the scheme, first home buyers can boost their savings for a first home by allowing them to build a deposit inside superannuation.  There are eligibility criteria that need to be met so best to speak to a finance broker if you’re thinking of saving via your superannuation.

Another reason why I feel that 2019 is an opportunity for first home buyers is that it is a buyer’s market at the moment. There are more houses for sale than there are people willing and able to buy them. This gives the first home buyers an upper hand when negotiating the final price for a home. As investors are staying in the sidelines, the values of houses are dropping. Falling prices are a great opportunity for first home buyers who were left out during the property boom.

Let us not forget the stamp duty exemption that first home buyers will enjoy if they purchase a new or established home under $650,000 in New South Wales and under $600,000 in Victoria.  If a first home buyer is purchasing a new home, then they qualify for the $10,000 first home owners grant both in Victoria and New South Wales. A first home buyer purchasing in regional Victoria may qualify for a $20,000 first home owners grant.

With the stamp duty exemption combined with the first home loan deposit scheme, a first home buyer in NSW purchasing a new or established home for $650,000 will only need a 5% deposit or  $32,500 to start the process of getting a loan.  A first home buyer in Victoria will need to come up with $30,000 to purchase a new or established home for $600,000.

There’s a lot of information out there and it can get overwhelming for first home buyers at the start. A study commissioned by Suncorp has found that first home buyers are actively saving but many don’t believe they can afford in their desired area or the home they want. A meeting with a finance broker can help first home buyers understand their borrowing capacity, how much deposit they need and make sure they’re financially fit and prepared for the buying journey.

Image by Brett and Sue Coulstock | Filckr

This article provides general information only and has been prepared without taking into account your objectives, financial situation or needs.  We recommend that you consider whether it is appropriate for your circumstances and your full financial situation will need to be reviewed prior to acceptance of any offer or product.  It does not constitute legal, tax or financial advice and you should always seek professional advice in relation to your individual circumstances. MBM Mortgage Pty Ltd trading as Maverick Finance | ABN 28 149 301 084 | Credit Representative Number 403019 is authorised under Credit License Number 389328

For questions related to this article, contact Maria Papa (details below).

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