Living on the Sunshine Coast is a luxury for many people because it caters for everyone who loves the beach to the hinterland. Although like many places, the affordability of housing is less appealing especially for first home buyers who are trying to get into the market. The rising pressure of job uncertainty forces many young adults to live at home for a lot longer than they intended, or to rent a home until they are much older.
The First Home Buyers Scheme that was announced by the Coalition last week sees the Government topping up first home buyers 5% deposit with a 15% guarantee of the loan. This is good news for first home buyers as they will only need to have saved 5% of the loan to buy a home.
To purchase a home valued at $450,000 first home buyers will need to have saved up $22,500 themselves to be eligible for the scheme. Previously, a common deposit for a home was 20% of the loan meaning that they would need to deposit $90,000 to purchase their first home. Moreover, buyers will also save over $10,000 by not having to pay lenders mortgage insurance. The change in deposit scope is said to have a positive influence and is guaranteed to help 10,000 first homebuyers. The scheme is limited to roughly one in ten first home buyers as around 110,000 Australians purchased their first home in 2018.
To be eligible for the scheme, you can either be a single who earns up to $125,000 a year or have a combined income with your spouse of up to $200,000 annually. Majority of Australia’s first home buyers fall into this category which is why the scheme is set to be so popular among the population.
The fundamentals of lending have not changed – a smaller deposit results in larger interest repayments over time. Lenders will still be diligent in their process at ensuring buyers are in the position to repay the loan. The scheme aims at cutting down the time that Australians spend saving for their deposit.
Morrison told the Liberal party campaign launch that the scheme is not merely “free money”, but if it helps Australians cut their time saving, then it will be a success.
Moving forward, the time Australians spend on saving to purchase their first home will dramatically decrease as first home buyers will now be able to purchase a home for less than $25,000.
If you want to find out more about the First Home Buyers Scheme, please contact us today.