The surprise initiative of the First Home Buyers Deposit Scheme (FHBDS) announced by Prime Minister Scott Morrison at the Liberal campaign launch has given new hope to many home buyers looking to enter the housing market.
On average, it takes the first home buyer 9 years to save the deposit required to purchase their first home. The government hopes that the FHBDS will substantially cut this time frame for many Australians.
The key points of the scheme are -:
- The scheme will start on January 1 2020
- Individuals earning up to $125000 per annum and couples earning combined incomes up to $200000 are able to apply for the First Home Buyers Deposit Scheme
- Borrowers would be subject to all of the usual checks and balances that banks and lenders apply
- The value of homes able to be purchased under the scheme will be determined regionally to reflect the difference in property markets throughout Australia.
- The scheme will potentially save first home buyers up to $10,000 in Lender’s Mortgage Insurance costs.
When announced, the FHBDS had funding of $500 million and was initially limited to the first 10,000 applicants. Some analysts suggested that this amount was not sufficient to have a significant impact upon the housing market. The government has indicated that they could be willing to increase the funding if required.
Some critics have suggested that the initiative presents some risks to borrowers that if markets move the wrong way, buyers could fine themselves in a negative equity situation. However, as buyers are subjected to normal lending criteria, their servicing ability should be sufficient to ride out any short term equity issues.
While the availability of the scheme remains limited at this time, it presents a wonderful opportunity for the first home buyer to enter the market.
If you would like assistance in arranging your first home purchase please contact Australian Finance Hub to discuss your current needs.