The new First Home Buyer Scheme of the Federal Government officially began on 1 January, making it possible for young buyers to secure funding for their first home. Under the First Home Loan Deposit Scheme, the banks have registered 3,000 prospective first home buyers. The additional 7,000 Scheme places will be eligible for the current financial year as from 1 February 2020 when potential applicants will have a pool of 27 lenders to choose from.
Under the program, the Federal Government will give every financial year a guarantee of 10,000 loans to first-time buyers. The government would offer a 15 percent balance, but the borrower would still have to pay it back.
This fiscal year NHFIC provides 10,000 First Home Loan Deposit Scheme guarantees. As of July 2020, a further 10,000 places will be open. The phased release of Scheme places offers first-time home buyers the opportunity to gather the financial information necessary to support their application and allows for a wider choice between major banks and smaller lenders.
From the 1st February, 25 smaller borrowers join the lending panel of the Scheme. Those with deposits between 5% and 20% of the purchase price will avoid paying the cost of lender’s mortgage loan insurance, usually worth about $10,000.
For example, a person buying a $500,000 property with a 5% deposit instead of a 20% deposit would need $75,000 less initially, but with a larger loan, their monthly mortgage repayments would be $329 extra a month and they would pay $43,546 extra in interest over 30 years.
Sally Tindall, research director at RateCity.com.au, says first-home buyers need to “weigh up the pros and cons” so it doesn’t cost them more in the long run. This is based on the basic principle of a CBA and interest home loan for an owner-occupier at 3.32 percent.