The second round of the Federal Government’s first homebuyer deposit scheme reopens July 1, giving 10,000 more people a chance to get into their own home if their deposits fall short.
This is part of the second round of the Government’s First Home Loan Deposit Scheme where 10,000 places open up today – the start of the 2020-21 financial year.
Run through the National Housing Finance and Investment Corporation, the way it works is the Government guarantees up to 15 per cent of the assessed property value to a participating lender, according to NHFIC chief executive Nathan Dal Bon.
“To date we’ve seen widespread appeal of the Scheme across all states and territories, including regional and metro areas.”
“Notwithstanding the current challenges posed by COVID-19, we anticipate that there will be continued demand for these new 10,000 places.”
A total of 27 lenders are participating in the scheme, with first home buyers for the second round needing their 2019-20 Notice of Assessment from the Australian Taxation Office to demonstrate that their taxable income is no more than $125,000 for individuals and $200,000 for couples.
Both National Australia Bank and Commonwealth Bank of Australia offered scheme-backed loans from January 1 this year, while 25 non-major lenders offered guaranteed loans from February 1, NHFIC said.
“All participating lenders are supporting the scheme by not charging eligible customers higher interest rates than equivalent customers outside the scheme.”
Sally Tindall, research director at RateCity.com.au said the scheme allowed first home buyers to take out a mortgage with as little as 5 per cent deposit, without needing to pay lenders’ mortgage insurance.
But the RateCity.com.au cautioned that a lower deposit would mean a bigger loan.
Buying a $500,000 property with a 5 per cent deposit, instead of a 20 per cent deposit, would need $75,000 less initially, but RateCity said it would mean a larger loan.
“Their mortgage repayment would be $395 extra a month and they would pay $67,067 in extra interest to the bank over 30 years” based on CBA’s basic home loan at a rate of 3.13 per cent for an owner-occupier paying principal and interest.
“Falling property prices come with both opportunities and risks,” Ms Tindall said. “People might find they don’t need to spend as much and their deposit, as a percentage of the property price, has actually gone up.”
“However, there’s a risk that property prices will fall even further and people who buy with a wafer-thin deposit could find themselves in negative equity if they’re not careful.”