Deposit Power welcomes the Coalition’s proposed First Home Loan Deposit Scheme that will offer up to $500 million in equity through the National Housing Finance and Investment Corporation. General Manager of Deposit Power, Grant Bailey stated “given the significant increase in property prices that we have seen in Melbourne and Sydney in the past five years, any proposal that assists first home buyers get onto the property ladder is welcome news.”
The coalitions proposed scheme will mean first home buyers will fast track their ability to get into the property market by reducing the percentage they will have to save for. “It currently takes more than eight years for first home buyers to save for a deposit to purchase a property in our major capital cities. This will proposal has the potential to significantly reduce that time frame” Mr Bailey stated.
In announcing the scheme, Prime Minister Scott Morrison stated “the First Home Loan Deposit Scheme will mean first home buyers won’t need to save for a full 20 per cent deposit”. In addition to reducing the time save for a deposit, there are also other benefits of the scheme. “One of the significant additional costs first home owners incur when they borrow more than 80% of the property value is Mortgage Insurance which is often in the thousands of dollars. This initiative has the potential to do away with that significant impost as well” Mr Bailey stated.
Deposit Power offer a Deposit Guarantee product which assists many first home buyers secure their property. The proposed funding only comes into effect at the settlement of the property, so the first home buyer will still need to pay a deposit which is where a Deposit Power Guarantee can be of great benefit to first home buyers. “A vendor will still most likely want a 10% deposit, so as the first home buyer may only have 5%, a Deposit Power Guarantee can assist in ‘topping up’ the additional 5% or otherwise guarantee the full 10% deposit” Mr Bailey stated.
With a proposed start date of January 1, 2020, the First Home Loan Deposit Scheme will be available to first home buyers who have been able to save for a deposit of at least 5 per cent. It will be capped for individuals earning $125,000 and couples earning $200,000 with the value of homes that can be purchases under the schemed determined on a regional basis.