21/11/2023
FIRST HOME GUARANTEE SCHEME
Buying your first home could be closer than you think. We hear lots of comments that customers think they don't have enough deposit, and much of this is informed by the education that a 20% deposit is optimal, because you can avoid big costs like LMI (Lender's Mortgage Insurance - it protects the lender if you default on your loan).
The First Home Guarantee Scheme (link in comments) guarantees part of an eligible borrower's home loan, up to a maximum of 15%. All you need is to qualify, secure your spot through a participating lender (we do this for you), and save up a minimum of 5% of the purchase price. With those three steps complete, good things happen:
- The lender treats the loan as if it were an 80% LVR (loan to value ratio) loan, which means no LMI is payable (save up to $20,000)
- You get an interest rate as if the loan was an 80% loan (rates in the low 6% area)
- The lenders credit policy is more flexible up to 80% than it is above 80%, so your credit suitability could be vastly improved (for example, more tolerance of a recently missed repayment on a loan/credit card)
As an example, if you have $45k saved, a household income of $140,000p.a, a $5k credit card, and $3,500 of expenses per month (excluding rent), you could be in good position for a $660,000 loan on a $700,000 purchase price. That gives you plenty of opportunity to buy, particularly around the Hunter Valley.
There's no need to feel like you must have hundreds of thousands of dollars squirrelled away.
It is important to note that this is not advice; your individual position will need to be assessed to determine suitability and before recommending any products that may achieve your objectives.
If you want to better understand your options to get into your first home sooner, make sure you reach out and we would love to help you!
