The Federal Government has moved to help first home buyers (and their parents!).
Housing affordability, particularly for first home buyers, is always an issue. A major part of that problem is saving deposit of 20% of the purchase price plus purchase costs. Not that you HAVE to have that large a deposit, but it means you avoid paying the extra cost of loan mortgage insurance (LMI).
Help is at hand!
A new benefit from the Federal Government commenced as at January 1st 2020, the “First Home Loan Deposit Scheme” (FHLDS). This was adopted as policy by the Morrison Government in the lead up to the Federal election in 2019, and is now in effect.
Unfortunately for prospective buyers it is not a cash handout, rather it replicates a parent guarantee situation with the Federal Government being guarantor instead of Mum & Dad. Which saves the LMI expense. And takes pressure off Mum and Dad.
This scheme is in an introductory trial stage currently limited to a maximum 10,000 in the calendar year, with an eligibility checklist on who can use it and how, including that you must have an initial 5% of the purchase price in regular savings.
Note also this scheme is only available through a limited number of banks. Previously established government benefits of savings on stamp duty and First Home Owners Grants remain available.
Prospective first home buyers need to speak to their broker to be aware of what is required to enable home ownership. Financial strategy in property purchase can be complicated and is different for every individual in a different situation. Quality advice is paramount.
On a general commentary level, first home buyers returned to the property market in force in the second half of 2019 along with a general increase in buyer numbers.
We are seeing Mum and Dad assisting in a large number of purchases via use of parent guarantee assistance, and we expect that to continue. It is important to note that these parent guarantees save the kids money without costing Mum and Dad anything (assuming the kids pay their loans..)
FHLDS has too many limitations to totally replace parent guarantees. But in many instances Mum and Dad are not in a position to be able to assist. This policy helps to fill that gap.
For more information – call your broker!
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