First Home Buyers Deposit Scheme

Any thoughts on the First Home Buyers Deposit Scheme that just came available on the 1/01/2020?

Just trying to get an idea of the pros and cons of this scheme.

I'm currently sitting on exactly 20% deposit for a house around 600k and am thinking of purchasing within the next 6 months but would like to have funds on the side in case the interest rates do rise in the future.

Should I apply for the First Home Buyers Deposit Scheme with a 5% deposit and 15% in the offset?

Any advice would be appreciated

Comments

  • I am intending to do what you propose, just be disciplined enough to keep the money in offset.
    Though, using the gov scheme limits the amount of banks to finance with, so have to do a bost benefit analysis - may be easier to skip the scheme.

  • +5

    Or you could just skip the scheme and leave the limited number of allocations to those who genuinely need the help

    • +2

      If there no difference between the interest rates with or without the scheme, please consider not taking a spot in the scheme. 10000 is a very small number.

    • -7

      Nerd

    • +1

      …to those that genuinely need it!

      Who are these people?

      Interested to know.

      In my uniformed opinion, I reckon the whole thing is silly. Will create more issues than it solves…

      If you're genuine, you scrimp and save for the minimum 20%.

      • +3

        Issue is. People struggle to save the 20% because they’re paying for someone else’s mortgage. Everyone should have an opportunity to own a property even if they don’t earn a lot.

        • "…Financial warning

          But financial experts have issued a warning.

          "The smaller the deposit they have, the larger the mortgage is going to be (and) the longer it's going to take to pay off," says Tim Lawless from CoreLogic.

          They say while it will cut the time to save for a deposit, the trade-off for those eligible is that they face paying tens of thousands of dollars in extra interest over the life of the loan.

          CoreLogic also warns the initiative could drive up house prices, pricing many more out of the market in the future…"

          https://7news.com.au/business/property/financial-warning-as-...

        • +2

          That’s only part of the issue. The real problem is that people want to own a house without giving up their lifestyle or want to buy somewhere they can’t afford.

    • -3

      First in best dressed.

  • Is the interest rate the same? I thought the first home buyers scheme was limited to some banks, meaning you might find a great interest rate and the bank may not be part of the scheme. I could be wrong though… or the best rate that you can find is with a bank that is eligible, in which case, meh…

    Additional paperwork can be annoying and may not be worth the hassle, the next interest rate is predicted to go south so I wouldn’t worry too much about rates.

    Edit… also you’ll need extra dollars for stamp duty (might not be much as it’s your first and if you intend to live in it), legals/conveyancing…

  • Do you still need to pay LMI on this scheme if you have less than 20% deposit?

    • Do you know details of the scheme?

    • +1

      You do not need to pay for LMI - that is the idea of the scheme

    • Don't know why you were downvoted since it is a legit question.

      You don't need LMI as the government is essentially acting as the guarantor so if you default on your loan, the government (via our taxes) will be the ones paying the bank back

  • +2

    +1 to the chorus of 'if you don't absolutely need it, preferably save it for someone who does'.

    Personally think it's just an attempt to keep the housing market propped up that little bit longer.

    • In other words- keeping the Australian economy at float for next 6-12 months while waiting for a international crises or impact. After that the housing market will drop like dominos. Govt will wash their hands stating it was all good under their watch but country A or issue B took us out, since the financial world is more connected than ever before. They would rally the sheep’s with words like “we are strong & it’s a recession we need for greater good” etc.

      People who bought in last 12 months and buying in the next 12 months are in for a surprise.

  • My understanding so far:

    You need to apply the scheme via the lender, and the major lenders are nab and cba, together they have 5,000 positions out of 10,000 of the total scheme nationwide.

    Once you apply via the lender, you get 10 days to obtain a pre-approval. After obtaining the approval, you have 90 days to secure a contract of sale. If not, after 90 days, you will need to reapply for the scheme. But whether there is still a position available is not guaranteed, imo the answer will be no.

    My thoughts:

    *I just cant imagine how banks/govt can manage this.

    Obviously the banks will receive more than 5000 applicants and but they also cant just approve for 5000 applicants, because obviously some will not get a COS in time. Same applies for the other 5000 spots at the non-major lenders. So for applicants that are on waiting list, how can they be sure they'll get a spot in the scheme? (me thinking out loud..)

    *Also taking syd as an example, purchase price is capped at $700k. Say you want to borrow up to 95% at $650k, i'd say you'd need to be at the higher end of salary cap (i.e. $115-125k for single applicant) to borrow that amount. Haven't mentioned that it's not easy to find a property at $700k that is close to CBD and amenities..

    • There are plenty of properties under $700k that are not close to the CBD.

      • I know, just saying to give an idea

  • To answer op's question, cba and nab dont offer the most competitive interest rate and personally i dont want to go with those non-major lenders

    • Which banks are good?

  • +1

    I think there are 4 problems with the scheme:
    - it limits your purchase price
    - it has paperwork and deadlines to meet
    - you borrow more so the re-payment in the first few years hardly eats into the capital
    - you have to go with only a select number of banks and their packages/interest rates are not necessarily the best

    Especially if you already have the money and want to put that money in offset, why going through this hassle and be bound by the limitations of the scheme?

  • Is this scheme available to only those who don't own ANY property (investment or PPOR) in Australia?

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