First home buyers should do their sums
We all know that buying your first home can be a challenge at the best of times, particularly in the current market conditions where there is such a shortage of properties available for purchase, and so many highly motivated buyers trying to compete for the limited number of opportunities.
So, it was good to see a bit of media attention this week on the new Victorian Government assistance program which is designed to aid those buyers with a low deposit to get into the market.
What quite a few people don’t seem to have realised is that there are actually TWO separate programs that are designed to aid people with lower deposits, so buyers in this situation will have a choice of the Victorian Homebuyer Fund and the Federal Government’s First Home Loan Deposit Scheme.
What is important for people to realise is that whilst both programs enable a homebuyer with a deposit as low as 5 per cent to buy a property, (as opposed to the 20 per cent deposit that is usually needed to avoid Lender’s Mortgage Insurance), they work differently and could favour different buyers depending on their circumstances.
In summary, the Victorian scheme allows you pay a 5% deposit and take out a mortgage for 70% of the property, leaving the government to effectively own the remaining 25% of the home. The Federal scheme effectively ‘guarantees’ your loan, even though your mortgage would be for 95% in the same situation.
Based on the above, your mortgage repayments will be a lot less with the Victorian scheme as your loan is lower. However, the other side of the equation is that when you sell the property down the track, part of the sale price goes to the government in the Victorian scheme because they own part of the property.
There are also other differences between the schemes, as the Victorian program will fund higher purchase prices, and is open to some other buyer categories who may not be first home buyers. A single parent who may not otherwise qualify for a loan is a prime example.
So, whilst it is not our business to provide financial advice to buyers, our strong recommendation if you are a first home buyer in this situation, is to get qualified advice before you commit to either program, so that you can fully understand the long-term consequences of your choice.
Of course, if you need help in finding the right property, whether you are buying your first home or your last, then don’t hesitate to call on the experience of our team at Barry Plant Frankston by calling 9781 3100.
Best wishes,
Barry Plant Real Estate
Frankston & Cranbourne