Despite all the negative noise off the back of THAT virus, and may be because of it, now is a great time for first home buyers to get into the market.  

A never seem before combination of a subdued property market as a result of the Covid-19, record low interest rates and unprecedented government support for first home buyers has brought about this situation. For those with the conviction about their ability to take on, and repay, a home loan, it is the best time for first home buyers in more than a decade.

Let’s have a look at each of these factors starting with interest rates. Interest rates are now under 3% for home loans and some fixed rates are under 2.2% pa. This means that many first home buyers are finding that the repayments on their new home loans are not much more than the rent for similar properties in the suburbs they current live in.

Next, the Coronavirus has brought the property market to a bit of a halt. Not just because people can’t inspect properties right now. It has meant business has been slowed, if not brought to a grinding halt. This has resulted in many workers losing their jobs and unemployment has jumped up to around 10%.

For those lucky to keep their jobs, many have had to take pay cuts of up to 20% (at least temporarily) and there is great concern (outside of essential services) about job security.

So for many potential property buyers, the idea of buying has gone on the back burner. This is particularly so for investors who represent the biggest competition for would be first home buyers.

Added to all of this, there is unprecedented levels of government support for first home buyers meaning lower levels of savings are needed to buy a first home.

Let’s have a look at the government support available for first home buyers:

  • Stamp Duty concession – There is no stamp duty on property purchases under $600K (and reduced stamp duty on purchases between $600,000 – $750,000).
  • The First Home Loan Deposit Scheme – The scheme enables first home buyers to borrow up to 95% of the purchase price without Lenders Mortgage Insurance for property purchases up to $600,000 in Melb & Geelong ($350K elsewhere in Vic). This saves buyers up to $26K and as a result reduces the size of the deposit needed
  • First Home Owner Grant – there are grants of $10,000 for new homes in Melbourne and $20K in regional areas.
  • HomeBuilder Grant – For a limited time, there is the HomeBuilder Grant which provides $25K towards building a new home or renovating an existing one

The eligibility requirements for each differs. So you need to do a bit of research or simply call us!

Case Study:

Kelly & John have bought their first home, an existing apartment, for $600,000. They qualify for the stamp duty exemption (saving them over $31,000) but there are still some costs so all up they will need around $603,000.

They have a loan approved for 95% of the purchase price, which is $570,000. They have managed to secure a place on the First Home Loan Deposit Scheme so they don’t need to worry about paying Lenders Mortgage Insurance. This means that their savings of $33,000 is enough to complete the purchase

They key to being able to take the plunge and capitalise on this unique combination of factors is simple but its importance cannot be under played in the current climate.

Taking the plunge and taking on a big commitment should only be done by someone if they have confidence in the stability of their job/business and the income they derive from it.  An affordable loan quickly become the opposite if a borrower loses their job.

If you know someone looking to buy their first home, or who ought to be looking to do so, we would love to hear from them and help them navigate their way to home ownership.

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