First Home Loan Deposit Scheme Update FEB 2022
Make 2022 The Year You Start Your Journey As A First Home Buyer
Transcript of: First Home Loan Deposit Scheme Update FEB 2022
G’day Will here, today we are going to have a chat about deposits and the amount of deposit you need to get into your own home.
So, we’re going to chat about what you should be aiming for as a benchmark, we’re going to chat about what you can do in terms of getting in the market with a lower deposit, say 5%. We’re going to even look at a sneaky way where you can get in off a 0% deposit using a guarantor.
Let’s get into it.
What's the basic figure I need to target when saving a deposit for my first home?
All right. All right. So first, we’re going to start off with your rule of thumb. So how much deposit do I need to buy my first home is generally one of the first questions that first homebuyers will ask.
How Much Deposit Do You Need To Purchase Your First Home In 2022?
Now, the general rule of thumb for that is 10%. So 10% of the purchase cost. For example, if you want to buy in an area where the property is around $600,000, you’re going to need about $60,000 to start.
Now, what I would say if you’re out there, and you’ve got that 10%, or you’re close to getting that 10%, I would advise you to basically get in touch with a mortgage broker straightaway and see what your options are in terms of being able to get financed for the house.
In these sorts of markets, they can move quite quick. And unfortunately, in the last two years, a lot of potential first home buyers have either waited and bought for a much higher price, or they’ve waited, and they’ve got priced out for whatever it was they wanted to buy. And now they they’re kind of sacrificing as to what they’re buying in terms of the location or the type of property.
10% is the rule of thumb, it’s not the be all and end all. It can be higher than 10%. And I’ll explain it this way. If you’re purchasing what’s considered high for a first-time owner, which is probably, I don’t know, 750 grand plus, then the 10% rule doesn’t necessarily apply.
Because the higher you go in terms of the price of the property, you’ve just then the higher the cost. The costs are mainly your stamp duty, and your lenders mortgage insurance.
So those two things are something that we won’t discuss today, because we’re more focused on deposits and not the expenses involved. But if you are looking to borrow at a higher amount, you’re going to get higher costs. You need to be engaging your mortgage broker, not necessarily for the stamp duty because you can look up the stamp duty costs, but lenders mortgage insurance is generally a little bit harder. But yeah, that’s why you should be aiming for 10%.
Can I purchase my first home with a 5% deposit
There’s got to be a lot of you sitting back going 10% is a lot. I must save 10%, I don’t know how that’s going to happen, especially if you’re paying rent, it can be a massive struggle. However, there is ways you can get in or 5%.
And you probably know people who have done this in the past and over a period of time, there are several different ways in which the government have helped first home buyers get in the property market of 5%.
How Much Deposit Do You Need To Purchase Your First Home In 2022?
The one that’s currently available is the first home loan deposit scheme or FHLDS for short. It is a very confusing scheme, because they’ve bought out lots of different variants of the scheme.
There are two main variants that I’ll discuss. The first one is for established housing. And the second one is for buying a new home. A house and land or something that is new, so bought off the plan.
What happens is, the government have provided 10,000 spots for people to access this game. That’s 10,000, both on established and 10,000 for new homes.
Now, what you need to know at the moment, is the established ones are not available, or the 10,000 have gone. What I will say to that is they haven’t announced when the next 10,000 will come but this has happened three times.
30,000 spots have come and gone for established houses in the last two years. What I would recommend is that if you’re in a position where you’ve got 5%, you need to engage a good broker.
It would be very hard to do this on your own because it is complex. And even though you can’t get access to this game now, what you need to do is have your ducks lined up so that when the time comes, and the scheme is available, your mortgage broker can jump on board and get you one of those spots quick smart. If you’re wanting to buy a new house and land package and you’ve got 5%, there are spots left. Click the links below, get in touch with us and we’ll be happy to help.
I just want to explain quickly how the how the FHLDS (first home loan deposit scheme) works in terms of why you only need 5% to put in as a deposit. What happens with the FHLDS (first home loan deposit scheme) is basically the government come on board and they say to the bank, hey, we’re going to guarantor this loan for the first home buyer. So, what happens is, the bank doesn’t need to get lenders mortgage insurance.
Therefore, you don’t need to pay lenders mortgage insurance, which can be up to 4%. That’s why we say, at the start, 10% is the benchmark, and that’s 5% for the deposit and another 4% for the mortgage insurance. My point is here that you only need to get the 5% because the government is stepping in and lending your hand, and you don’t need to find the extra mortgage insurance cost.
I’ll quickly touch on mortgage insurance. And what that is, is when you need to borrow a higher proportion of the loan to the point where the bank deems it risky, which is over 80% of the value of the property, then the bank will take out a mortgage insurance just in case you cannot pay the loan back. Because if you cannot pay the loan back, the bank will have to sell the security, which is the house that you’ve purchased.
And if they sell that property, and the market drops or something like that, the bank is still owed money at the end of it. Let’s use some numbers. Let’s say it’s $500,000 owing on the loan, and the bank sells your property for $450,000. Let’s say the markets crashed, well the bank has lost $50,000. So, what the bank does to basically mitigate this risk is they take out an insurance policy, and that’s called lenders mortgage insurance. What happens with that policy is the borrower pays. Bottom line is if you’ve got 5% you can get in the market.
Can I use a guarantor to purchase my first home?
Now, there’s going to be people out there that have basically just started on this journey. They might be younger, they might have been living overseas, their deposit is closer to the zero mark. There is a way you can get it off the market when you deposit is zero. And that is to use a family member as a guarantor to purchase your first home.
So much like the example I discussed with the government giving the guarantor in the first home loan deposit scheme, instead of the government giving the guarantor, your family member gives it. And what they do in that scenario is they would have a property, which they could put up as co-security to the loan. From the bank’s point of view, that’s a lot more risk free if you the borrower cannot pay the loan back because now, they have two properties held against the one loan.
Obviously, if you’re depositing zero and you’ve got a family member contributing a home, to go secure against the loan, the lender is going to do a lot of checks. They want to be sure that you’ve got the right amount of income, they want to be sure that your bank statements are clean and your credit files are clean and that we’re all good for the loan, because the last thing anyone wants is to be is in a position where the bank have to sell both properties or even just chase the parents for the money.
So again, guarantor loans can be, yeah, they are complex, but there is an option out there for that. The Bank of mom and dad, which is what they’re calling it. In recent times, it’s just getting more and more popular with house prices just continuing to go up.
That’s it. I hope you enjoyed my explanation on what deposit you need in 2022 to get into the market. If you guys need anything, if you’ve got any questions, please get in touch via the links below. And we’d be only too happy to help if you have 5%. We are taking people on board now and we’re getting them ready.
We’ve got a number of buyers waiting in line to access one of these 10,000 spots on the established first home loan deposit scheme. So if you’re out there, don’t don’t don’t wait because there’s a lot of other people in the position that the rest of my clients and they’re waiting and those 10,000 spots, I have a feeling they’re going to go much quicker than the previous ones. That’s it for me today guys. I hope you enjoyed that. Have a good one, cheers!
Thanks for listening to today’s episode of the first home owner concierge podcast. If you’ve got any questions or you would like to get into your own home or you just want to stalk me online. You can search Will Bell Mortgage Broker on Google or Facebook. Or follow the links below.