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First-time home buyers should deposit 20% or less of the property’s worth. This will help you avoid costly lenders insurance.
If you add stagnant wage increases to the mix, it creates a situation in which only the most financially secure millennials can get in.
There are still some hope.
There is a way that first home buyers can have a deposit of just 5 per cent – and have the Federal Government as the guarantor for the remaining 15 percent – if you play your cards right.
Q: What is the First Home Loan Deposit Program (FHLDP)?
A:The Coalition Government’s draft proposal to the First Home Loan Deposit Scheme is intended to assist first-time home buyers in getting into the property market.
Buyers who get a first home loan can finance their purchase with as little down as 5%. In this instance, the government will guarantee the difference (in other words, 15%) and they will not have to make a down payment.
The remaining 15% will be due by the buyer, who technically borrowed 95 percent of the property’s value from a lender.
It is currently in draft. It is currently a draft. However, if all parties approve it by November 4, it can be put into effect January 1, 2020.
Q: Sounds risky for the government – what’s to stop millennials from asking the government for cash to live in multi-million-dollar mansions?
A:It may be a relief knowing that the scheme caps the cost of properties first-time homebuyers want to purchase.
First home buyers can buy properties for as high $700,000.
If you’re outside a capital city – or a significant regional centre like Wollongong – that cost drops down to $450,000.
To ensure that prices are not discriminatory across the country, the government established price thresholds in each state and territory.
| State/territory: | Capital City/Regional Centre | Rest of the state |
| NSW | $700,000 | $450,000 |
| VIC | $600,000 | $375,000 |
| QLD | $475,000 | $400,000 |
| WA | $400,000 | $300,000 |
| SA | $400,000 | $250,000 |
| TAS | $400,000 | $300,000 |
| ACT | $500,000 | N/A |
| NT | $375,000 | N/A |
Q: How can I tell if the regional center in my region is large enough that it can support the capital cities prices?
A:Capital cities with a population greater than 250,000 are exempted from the price caps.
The capital city price caps would apply to places like the Illawarra, the Sunshine Coast, Newcastle, the Gold Coast or Newcastle as well as Lake Macquarie and Lake Macquarie.
Q: What is the reason why house prices are so high? A: Rich people own property after property. Why can’t children of wealthy parents use the government to finance this scheme, even if they can afford a deposit.
A:To be eligible for the scheme, first homebuyers must meet certain criteria.
Singles with taxable income exceeding $125,000 per annum will not be eligible. Couples will have a maximum income of $200,000 per year.
While inheritance is not subject to tax in this country, it can be used to determine a person’s current cash flow.
Q: It sounds amazing. Q: It sounds great. What’s the catch?
A:There is no catch, but only 10,000 people are eligible to apply.
About 110,000 Aussies bought their first home last year. This means that only one in ten first-homebuyers can benefit from the scheme.
It is possible that all 10,000 spots will be filled if the scheme is approved by legislature on January 1, 2013.
Q: What amount of money can people save using this scheme to help them? Could you please give some examples?
A:Let’s look at some scenarios.
SCENARIO ONE
Imagine Ben, a Newcastle carpenter making an average national salary $74,074. He is eligible because he earns less that $125k annually. Also, he can buy a property below the Sydney price limit. Newcastle has more properties than $250,000.
This opens up new possibilities for properties like this three-bedroom house in MayfieldThis property was valued at $640,000
Ben would need to put down $32,000 to secure his place in this family home. This is equivalent to the price of a decent second-hand, dual-cab ute. The rest will be funded by the government.
Without the scheme, Ben would have had to pay as much as $128,000 (20 per cent) – representing an immediate saving of $96,000.
SCENARIO TWO
Jenna lives in Melbourne with Joe, her husband. They have two young children. As a household, they have a combined income of $194,000 – just scraping in below the $200,000 eligibility cap.
Jenna struggles to save money for a 20% deposit due to ongoing childcare costs. Jenna hopes that she will purchase a property within 10 years. Jenna’s current two-bedroom apartment is too small for them all.
Jenna could however secure financing under the scheme beautiful four-bedroom home at PakenhamIt is estimated to be worth $600,000.
Traditionally, a 20 per cent deposit for this house would cost Jenna and her husband $120,000 – but the scheme would reduce that to just $30,000.
SCENARIO THREE
Jessica lives in Gove in the remote northern part the Northern Territory. She makes approximately $45,000 per annum working remotely from her home.
She is determined and eager to purchase a home at Arnhemland. However, her wages are not sufficient to allow for much discretionary spending.
Jessica could purchase a house in the scheme. this three-bedroom home in BynoeThis property is valued at $339,000.
She would need $16,950 to deposit five percent (approximately 325 weekly for a full-year or 42%).
Saving a 20 percent deposit for this property – approximately $67,800 – would take Jessica 208 weeks, or four years at her current rate.
Q: Last but not least … why is the government doing this?
A:It is dangerous to try to guess the motivations behind policies. This is something we know for certain: Scott Morrison made this promise during the election campaign.
Even better, more first homebuyers are able to service their loans. This is a sign that the economy is stronger and more stable.
Ironically, giving 10,000 households instant access for fast deposits could cause property prices to rise, making them more expensive for everyone.
Put simply, there is no such thing as a silver bullet for first homebuyers – and even though the government is being guarantor for the remaining 15 per cent of the loan – first homebuyers still have to pay it back eventually.
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