After making several interest rate cuts, the focus is now on first home buyers, with the RBA leaving the official rate on hold this month. The official cash rate sits at the record low of just 1.00%. While this is good news for many looking to buy property, saving for a deposit is still the biggest impediment for the first home buyer.
An additional problem is that unless you have saved enough to secure a 20% deposit, (which is likely to take at least several years), you will also have to stump up for Lenders Mortgage Insurance. That can amount to many thousands of dollars more. On a $400,000 loan, for example, with a 5% deposit, LMI can amount to a further $12,000.
The Government First Home Buyers Loan Deposit Scheme
To provide some assistance, from 1st January 2020, the Government is introducing a grant that will make home-ownership far more attainable for many eligible first tiome buyers. Under the new scheme, only a 5% deposit will be required. The Government will guarantee the rest, covering the remainder under a special loan.
So, if you’re looking to buy your first home, you could potentially be able to enter the property market much quicker than before and avoid having to save the extra required for LMI.
However, there are a few restrictions: the scheme is restricted to 10,000 borrowers and limited to those earning under $125,000, or $200,000 for a couple.
- If you save a 5% deposit, the Government will guarantee the remaining 15% deposit
- You can avoid LMI, but still have to borrow the remaining 95%
- The scheme is limited to 10,000 buyers
- Begins 1 January 2020
- It will be administered by the National Housing Finance and Investment Corporation (NHFIC) in partnership with lenders
- The Government will prioritise ‘smaller lenders’ to boost competition
Together with the low-interest rates, this new Government scheme could be just the boost you need to jump onto the property ladder for the first time, so it’s well worth checking out if you are eligible first home buyers.