A Home Buyer Assistance Scheme is support provided through the Federal Government to assist buyers in the purchase of a home through varying programs. With interest rate increases from the Reserve Bank (RBA), the lack of availability housing and changes to property investment announced in the Federal Budget, the housing market is a dominant topic in the news and political debate.
Despite the coverage, interest from stakeholders and the drop in property values, many first home buyers are still finding it difficult to buy a home. Many may be considering whether participating in one of the programs offered by the Government will help them achieve their home ownership dream. There are several schemes and programs available with varying eligibility, features and benefits. They range from shared equity, low deposit support, and use of superannuation. We cover off on what is available and encourage buyers to consult with one of our mortgage brokers on the upsides and downsides and if this is the right move for you.
Home Buyer Assistance Schemes
A major issue for many first home buyers is saving the standard 20% deposit to buy a home. The Government’s Low Deposit Home Loan programs may be considered. These programs can be accessed through a shared equity set-up with the Government or accessing voluntary super contributions.
First home buyers and single parents can apply for the 5% deposit program where the Government guarantees the remaining 95% of the deposit. The guarantee is not a grant or funds supplied but a guarantee. With the Government guaranteeing the balance of the deposit required, buyers do not need to pay Lenders Mortgage Insurance (LMI).
While this may be an attractive option, the recent fall in property values has shone the spotlight on the issue of negative equity which can impact low deposit property buyers. That is when the value of the property falls below the amount of the loan. Higher rates can also apply to lower deposit loans.
While LMI is an upfront cost which is not required with this program, buyers will still need to pay Stamp Duty and conveyancing costs. These can be substantial and should be considered when assessing how much buyers have available for their deposit and their mortgage payments.
To be eligible for the First Home Super Saver Scheme, applicants may need to wait a while. To be eligible, you will need to make voluntary contributions to your superannuation, not the superannuation guarantee as made by the employer, for up to $15,000pa to total $50,000. The funds can then be used to fund the deposit on a home. It does not allow participants to use the superannuation that has accrued through superannuation guarantee payments from their employer.
If considering this option, buyers will require a high enough salary to provide the additional money to contribute to their super. Some super funds can generate good returns which may be higher than interest earned on a standard savings account, allowing for faster growth of funds towards that deposit.
Building super for retirement is important and super funds are treated by lenders as an asset when assessing loan applications, a factor which may be important in the future.
As an alternative to the super scheme, buyers may apply for a Low Deposit Home Loan now rather than waiting for the time and availability of funds to make the necessary voluntary contributions.
A Help to Buy Scheme is also available to eligible participants with the Government bridging the difference between the buyer’s 2% deposit and the required deposit. This scheme is limited in numbers and has stricter eligibility than some of the other schemes.
To participate in any of the Government programs, buyers still need to meet the criteria for home loan approval by lenders. The Borrowing Capacity will be assessed based on income and expenses and rates offered based on loan-to-value ratio, financials and credit profile.
Buyers considering these programs may use our Borrowing Capacity Calculator for a guide of what they may be approved to borrow at current rates with the deposit assistance. Using this estimate, mortgage payment estimates can be calculated with the Home Loan Payment Calculator.
Loans Available with a Home Buyer Assistance Scheme
The Government programs to assist buyers with their home purchase require the loan to be sourced from participating lenders. We are accredited with these lenders and can assist buyers with applying for their loan.
Loans are limited to owner-occupiers, not investors. The standard principal and interest mortgage would typically suit most buyers. The interest rate may be fixed or variable depending on the market at the time of application.
The Government programs may present ideal opportunities for many buyers to get into their first home but may not be suited to others. Consult with one of our mortgage brokers on whether these opportunities are suited to your personal circumstances.
For advice on suitability for you of a Home Buyer Assistance Scheme, connect with Yes Home Loans on 1800 000 937.
DISCLAIMER: THE INTENTION OF THIS ARTICLE IS TO PROVIDE INFORMATION OF A GENERAL NATURE ONLY. THE ARTICLE IS NOT PROVIDED WITH THE INTENTION OF BEING THE ONLY SOURCE OF INFORMATION ON WHICH PROPERTY BUYERS SHOULD MAKE THEIR DECISIONS. BUYERS WHO NEED GUIDANCE AND ADVICE ON PROPERTY LOANS BASED ON THEIR INDIVIDUAL CIRCUMSTANCES ARE ADVISED TO CONSULT WITH A SPECIALIST MORTGAGE BROKER OR FINANCIAL CONSULTANT. NO LIABILITY IS ACCEPTED FOR MISREPRESENTATION OR FOR ANY ERRORS IN DATA, POLICIES AND SPECIFIC DETAILS THAT HAVE BEEN OBTAINED FROM OTHER SOURCES.