That first step made a little easier

Federal Government’s First Home Buyer Deposit Guarantee scheme

After much initial fanfare but little recent coverage, the Federal Government’s First Home Buyer Deposit Guarantee scheme (say that fast 10 times) has now gone into effect and will start having an impact for eligible buyers purchasing their first home across Australia.

While interest rates remain at their lowest ever levels, given the rising cost of housing on a national stage and the increasing cost of rent putting a dent in prospective purchasers saving capacity, the Deposit Guarantee scheme is designed to assist buyers by reducing the requirement for a deposit from 20% of the purchase value to as little as 5% for up to 10,000 purchasers.

In practical terms, where that $400,000 home would have required a buyer to have $80,000 upfront, those same buyers can now purchase the same home with as little as $20,000 with no impact other than slighter higher repayments to reflect the larger sum borrowed. Appreciating that $60,000 rarely falls out of trees (if anyone knows otherwise, please point me in the direction of that forest), being able to make a move with a lesser deposit could put you in your own home years sooner than might have been the case.

For first home buyers purchasing a brand new home (or building), the benefits compound, with some financial institutions allowing you to use the $15,000 grant as part of the deposit, putting our hypothetical purchasers in the position of being able to purchase a home with as little as $5,000 in genuine savings.

Now, while you COULD do this, its not necessarily the right decision for everyone, and I would certainly encourage buyers to be doing an awful lot of homework on their financial and family position, their current needs and their needs over the next few years. Real Estate is rarely a profitable short term exercise and buyers should always consider how property fits into their overall lifestyle. Low initial equity can also put buyers at greater risk of going into negative equity should the market change for the worse.

If you ARE in a position to take advantage of this new scheme, do be quick. With just 10,000 applicants supported, this won’t last long. As always, plan ahead for your property success – particularly as we move into a new (and hopefully prosperous) 2020.