Government offers helping hand for First Home Buyers
The Federal Government has announced details of the First Home Loan Deposit Scheme which will begin from 1st January 2020. The initiative is designed to help first home buyers purchase their home sooner, by reducing the deposit they need to save for.
The scheme, which was a key election promise by the Coalition, will allow eligible first home buyers to purchase a property with a deposit as little as 5%. Banks would normally require a 20% deposit and if a first home buyer was unable to contribute this amount, Lenders Mortgage Insurance would be charged. Depending on the size of the loan, mortgage insurance can be upwards of $10,000.
Under the First Home Loan Deposit Scheme, the Government will underwrite the loan so that borrowers with only a 5% deposit do not have to pay lenders mortgage insurance. For many first home buyers, paying off the mortgage is not the issue, but saving for a 20% deposit on a $400,000 loan ($80,000) can take years. A 5% deposit on the same property would require just $20,000.
Eligibility and Price Caps
Whilst the assistance is welcomed, the deposit scheme is capped at 10,000 loans per year and is on a first-come, first served basis. The scheme is available for singles who are earning up to $125,000 per year and couples with a household income of $200,000 per year.
Each state has a price threshold that determines the maximum purchase price under the scheme. In Queensland, properties with a value up to $475,000 are eligible within Brisbane, the Gold Coast and the Sunshine Coast. For the rest of the state, a price cap of $400,000 applies.
Stamp Duty Concessions
The First Home Loan Deposit Scheme is in addition to stamp duty concessions, which exempt first home buyers from paying stamp duty on homes under $500,000. Without the concession, the stamp duty on a $500,000 property would be an additional $8,750 that new home owners would have to pay.
The Brisbane City Council has also offered a helping hand to First Home Buyers, announcing a new initiative that will cut council rates in half. From the 1st of October 2019, First Home Buyers can receive a 50% discount on their council rates to help ease the cost of living.
12 month Council Rates Discount
The discount is available to homes with a value less than $750,000 within the Brisbane Local Government area. Discounts will be applied to the first 12 months of home ownership, up to a maximum of $1,000.