Concessions and assistance for First Home Buyers – and the New Home Loan Deposit Scheme is now in place with starting date 1/1/2020!

In Victoria – there are concessions both in Stamp Duty costs plus a Grant for First Home Buyers – (tax free) –

A $20,000 First Home Owner Grant is available to applicants buying or building a new home in regional Victoria valued up to $750,000.

A $10,000 First Home Owner Grant is available to eligible applicants buying or building a new home valued at up to $750,000 in metropolitan Melbourne.

First home buyers purchasing a new or established home valued below $600,000 will be exempt from stamp duty, while buyers purchasing a new or established home valued between $601,000 and $750,000 will be eligible for a stamp duty concession, applied on a sliding scale.

There is now a brand-new scheme to assist first home buyers to buy their first home without the need to save a 20% deposit or take out extra mortgage insurance (LMI).

The First Home Loan Deposit Scheme

  • If you’ve saved 5% of the purchase price of your property, the government will guarantee the remaining 15% of the deposit.
  • You will still need to borrow 95%, but you can avoid LMI.
  • Eligible first home buyers can’t be earning more than $125,000 a year ($200,000 for couples).
  • Access to the scheme is limited to 10,000 borrowers per year.
  • The value of eligible homes under the scheme will vary by region.
  • The scheme starts on 1 January 2020.

The scheme will be administered through the NHFIC in partnership with lenders.  The government has indicated it will prioritise “smaller lenders to boost competition”.

Given the start date is a few months off, there will be more information to come.  However, it would be worth considering by those who are planning their first home purchase.

What are the benefits of the scheme and who is eligible?

5% deposit home loans already exist, but you generally need to pay LMI (expensive loan insurance) when borrowing more than 80% of a property’s value.

The First Home Loan Deposit Scheme removes this cost, so you’re saving money and time. That is, once you have saved 5% you are potentially ready to buy!

If you already own an investment property you won’t be eligible.

Beware of your level of debt however…

If you are now able to purchase your first home with only a 5% deposit, it means you have borrowed 95% of the purchase price.  There is a risk in this if market values fall – as you have less ‘equity’ in the property.

Note – the Government doesn’t give you any money toward your deposit – it simply guarantees the deposit to the lender so that you don’t have to save 20% before you start.

Therefore – you still need to be able to meet your repayment commitments and living costs!

Your first home is likely to be a long term ‘investment’ – so provided you can meet your regular loan repayments; the loan will be reducing over time and (hopefully) the value of your property will be increasing – resulting in a growth of net wealth to you.

Happy first home house hunting!

Peter Cramer