First home buyer? How to enter the market!
There is a lot of commentary at the moment around how difficult it is for first home buyers to enter the market.
In my opinion, first home buyers are the most disadvantaged borrowers in the market- they mostly have modest incomes as they are early on in their career and they need to save for a deposit, oftentimes whilst also paying rent.
Here is my take on what needs to be done to help first home buyers.
Federal Government level
The Federal Government scheme "first home buyer deposit guarantee scheme" was fantastic, however, the yearly placements were exhausted within the first 30 days, so the government really needs to expand the offer and increase more placements.
The scheme really helps first home buyers as it allows clients with a 5% deposit to avoid the costly lender's mortgage insurance premium.
By avoiding that premium, which can cost circa $20,000, the clients can enter the market quicker as they do not also have to save for the mortgage insurance.
NSW Government level
Next up is the NSW government- which really has a lot to answer for, as it only waives the stamp duty for existing properties, up to a value of $650,000. Now show me where clients can purchase with that amount of money in Sydney?
Anyone living in the Eastern Suburbs of Sydney would have to move well outside of Sydney to stay within that cap. It's also a myth that all clients in the Eastern Suburbs are rich and can afford stamp duty.
The stamp duty waiver needs to be increased to $1,000,000 to better reflect the medium house and apartment prices for Sydney.
Whilst I am on those NSW schemes, the offer to waive stamp duty to $800,000 for new homes is also not realistic, and was made to prop up the building industry.
Lenders can do more to offer low deposit home loans, apart from guarantor loans, which are not available to all clients.
10+ years ago, ING Bank had an amazing loan where first home buyers could borrow 100% of the purchase price, and that coupled with the stamp duty waiver, significantly reduced the deposit required for purchase.
ING did have very stringent criteria which is fine as we really don't want clients to get in trouble paying back the debt.
So my take is the Federal Government has done a great job of starting the deposit guarantee scheme, but it needs expanding, and the NSW Government has done bugger all helping first home buyers with stamp duty relief at realistic purchase prices.
Are you trying to purchase your first home? I can help! Let's get you started here.