Saving up a deposit for a house is often one of the biggest obstacles for first home buyers. The Morrison Government has promised to help eligible first home buyers purchase a property with a deposit of less than 5%. The scheme will start by January 2020, and not only does it speed up saving time, but it will also allow first home buyers to achieve their dreams of owning their home sooner.
We're used to helping first home buyers navigate the property industry and the eastern suburbs can sometimes be a little out of reach for these buyers if they're not properly prepared. This scheme is set to make things a fair bit easier, but it can be hard to follow, so Ann Paterson Real Estate is happy to explain just how it works.
There are some 5% deposit schemes that already exist, but you generally need to pay lenders mortgage insurance, which often costs first home buyers tens of thousands of dollars.
According to the Morrison Government, single people earning up to $125,000 or couples earning up to $200,000 will be eligible for the scheme if they have saved 5% of the value of the property. However, you will need to be a first home buyer to be eligible, meaning if you own an investment property, you won't be eligible.
The scheme is currently limited to 10,000 borrowers, meaning a lot of Australians will miss out. Furthermore, a 5% deposit means that the monthly repayments on the mortgage will be larger.
There is always an added risk of buying in a slower market. If prices continue falling, then there is a risk that first home buyers will end up in negative equity - this is when your mortgage ends up being bigger than the value of the property. It also means it will be harder for first home buyers to sell the property or refinance.
While prices in Sydney's east have stabilised inline with the wider Sydney market over the past year and a half, there is still high demand for good quality homes in great locations. Buyers looking to purchases homes in areas such as Dover Heights, Double Bay, Woollahra and elsewhere in the eastern suburbs needn't worry too much about a huge drop in value.
If you’re in the market for a first home and getting together a large deposit has been holding you back, the First Home Loan Deposit Scheme is likely to be beneficial, especially if they are able to service the loan.
Having said that, the Australian mortgage market is competitive and complex, and lenders will still be required to go through all the checks to ensure a first home buyer has genuinely saved up their deposit and can afford their mortgage.
Talk to your broker who will be able to work with you, compare the various options available, and find a mortgage that matches your needs. Our team at Ann Paterson Real Estate is also happy to help guide you through buying your first home.