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First Home Buyer Incentives

You may have noticed that the property market is buzzing with first home buyers lately, but do you know why?

The banks are targeting first home buyers with lots of specials to choose from.
So why the increase in activity?

Well the answer is simple… first home buyers are always more active in a soft (slow) market; so with investor activity down 45% and the lowest interest rates ever offered to Australian borrowers, the door is wide open for first home buyer opportunities (at least for the moment).
First home buyers have historically been the most disadvantaged.  Why?  Well the answer again is a simple one.  Unless they can accelerate their savings, get a gift or guarantee from parents or win the lottery to get the magical 20% deposit, as well as having to save  the initial deposit, they will also have to pay mortgage insurance.  (Any loan amount greater than 80% of the value of the property being purchased is subject to Lenders Mortgage Insurance (LMI).  This policy protects the Lender for any funding losses incurred in case the borrowers’ default on their loan and is designed to protect the lender not the borrowers.)

For example, if a first home buyer couple wanted to buy a property for say $700,000 and they only had savings of $100,000 after purchase costs (eg legals, pest & building & bank fees), their Loan Ratio would be a little over 14% and would need to borrow 86% of the purchase price. This would incur an LMI fee of approximately $7,500 (varies between funders). The good news however is that this amount can be added to the loan amount of $600,000 and repaid over the term of the loan so doesn’t need to be paid upfront, making this an affordable option.

In a bid to further support first home buyers (as well as the construction industry), the NSW State Government has amended the stamp duty exemption for new home purchases from $650,000 to $800,000 with further concessions (under a sliding scale) for new homes under $1million.

So let’s look at the new offers available to first home buyers:

  1. First Home Loan Deposit Scheme.  This offer will allow first home buyers to purchase a new home with only a 5% deposit with the remainder secured by the government, to avoid LMI fees. Whilst this is no doubt the best option available for those with small deposits, it does come with conditions attached for you to qualify. On the downside, there are limited spots available, and seemingly no visibility on how many spots are left.   And, a 5% deposit means a 95% loan, which will leave you with higher mortgage repayments.
  2. The $1 LMI Fee.  This is a definite boost for first home buyers who have managed to save a 15% deposit and can be rewarded with an LMI fee. Qualifying is much simpler and there are unlimited spots. *It is however a limited time offer that can be changed or withdrawn at any time so you need to contact us ASAP to cash in on this offer.
  3. Smaller offers of up to $1,000 in conveyancing fees rebates along with other rate specials for first home buyers are also available from various funders.

So how can we help you if you are a first home buyer?

Navigating the market and all the offers (which are constantly changing) by yourself can be overwhelming and somewhat confusing.

The good news is, is that we are here to help and can answer any questions you might have.

We can put together an easy to follow plan for you if you’re ready to buy now, or if you are not quite there yet, we can help you work on your savings plan, or other potential strategies to get you there quicker. We even have a free phone app that will help you keep on track so you know exactly when you are ready to buy.

If you would like some advice on your specific circumstances or know some first home buyers who are keen to jump into a property, please feel free to give me a call on 0411 216 849…or book a time to chat.