First Home Buyers Build $82,000 in Equity with Minimal Deposit

New data shows that first home buyers who bought into the market using the federal government’s 5% deposit scheme have racked up $82,000 in home equity on average.

It has been three years since the First Home Loan Deposit Scheme was launched, and while it is known today as the Home Guarantee Scheme (HGS), it is still helping first home buyers get into the market with just a 5% deposit and no lenders’ mortgage insurance (LMI).

The HGS attracted criticism from some circles – some pundits pointed to the low deposit as a stumbling block that could land homeowners in trouble if property values fell, or interest rates rose. It turns out that both have happened, yet first home buyers have not let it hold them back.

From $35,00 deposit to $82,000 home equity

New data from the National Housing Finance and Investment Corporation (NHFIC), which runs the HGS, shows that first buyers who tapped into the 5% deposit scheme are now sitting on impressive piles of equity. On average, these first time homeowners have racked up $82,000 in home equity.

It is a great result, especially when you consider that the average first home deposit across the scheme was just $35,200 in 2020 rising to $36,400 in mid-2023.

Compare that to the average deposit of $159,000 across the broader first home buyer market, and it is easy to see how the 5% deposit scheme gives first home buyers a valuable leg-up into the market sooner.

What is the Home Guarantee Scheme?

Getting a deposit together can be a massive hurdle when buying a home. Research by Finder shows that it can take 12 years for a young Australian to save a deposit for an average-priced apartment, or 16 years to accumulate the deposit for a house.

But if your deposit is lower than 20%, you can get stung with LMI, which can cost anywhere between $4,000 and $35,000, depending on the property price and the deposit amount. However, through the NHFIC, the federal government has three low deposit, no LMI schemes – all under the HGS umbrella.

The First Home Guarantee and Regional First Home Buyer Guarantee support eligible buyers to purchase a home with a low 5% deposit and no LMI.

The Family Home Guarantee assists eligible single parents and guardians to buy a home with a deposit of just 2% and no LMI.

Want to crack the market sooner?

Along with HGS, there can be other options such as family pledge loans or the use of a guarantor, that could slash the time it takes to buy a home of your own.

If you want to crack the property market sooner rather than later, call us today to find out if you are eligible to buy a first home with just a 5% deposit.

Phone: 1300 855 022

Email: clientservices@zippyfinancial.com.au

Zippy Financial is an award-winning mortgage brokerage specialising in home loans, property investment, commercial lending, and vehicle & asset finance. Whether you are looking to buy your first home, refinance or build your property investment portfolio, the team at Zippy Financial can help find and secure the right loan for you and your business.

About the Author:

Louisa Sanghera is an award-winning mortgage broker and Director at Zippy Financial. Louisa founded Zippy Financial with the goal of helping clients grow their wealth through smart property and business financing. Louisa utilises her expert financial knowledge, vision for exceptional customer service and passion for property to help her clients achieve their lifestyle and financial goals. Louisa is an experienced speaker, financial commentator, mortgage broker industry representative and small business advocate.

Connect with Louisa on Linkedin.

Louisa Sanghera is a Credit Representative (437236) of Mortgage Specialists Pty Ltd (Australian Credit Licence No. 387025).

Disclaimer: This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information. This article is not to be used in place of professional advice, whether business, health or financial.

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First Time Buyers: Your Time is Now

If you’ve been thinking about purchasing your first home, right now you have the best opportunity there has been in years to get onto the property ladder.

Not only have property prices dipped across the big cities, but the RBA has lowered interest rates yet again and many banks and lenders are passing on the cut – making it cheaper than ever to borrow money for property.

Add to this recent changes from APRA, which reduce the loan assessment rate and effectively boost your borrowing power – and first home buyers are in the box seat!

In fact, in some suburbs, you may find that you’ll be saving money once you buy as opposed to renting, as your mortgage repayments could be lower than your weekly rent.

On a typical $400,000 loan taken out over 30 years at 3.5% interest, your monthly repayments would be $1,796. However, the latest rate cuts make this loan even more affordable, dropping it by more than $100 to just $1,686.

This works out to be around $390-$415 per week – which could be on par with (or lower than) your current rent.

The tide really has turned for those first-time buyers who may have been feeling disheartened as the market ran away from them over the last few years. This is your chance to buy a home of your own, possibly for less that you’re currently spending on rent, and enjoy all the benefits home ownership has to offer – security, building equity and financial freedom, and of course painting, decorating and renovating any way you want!

Why is now a good time for first-time homebuyers?

Now is an excellent time for first-time homebuyers because property prices have dipped in major cities, and the Reserve Bank of Australia (RBA) has lowered interest rates. Additionally, changes from APRA have boosted borrowing power, making it easier to get a loan.

How have the latest rate cuts impacted loan affordability?

The latest rate cuts have made loans more affordable. For example, a typical $400,000 loan taken out over 30 years at 3.5% interest would have monthly repayments of $1,796. With the rate cuts, this amount drops by more than $100 to just $1,686.

How do the new loan rates compare to current rent prices?

The new loan rates could make your monthly mortgage payments around $390-$415 per week, which may be on par with or even lower than your current rent.

What are the benefits of home ownership?

Home ownership offers various benefits, including security, building equity, financial freedom, and the ability to decorate and renovate your home as you wish.

How can Zippy Financial help first-time homebuyers?

Zippy Financial can simplify the home loan process, making it stress-free for first-time buyers. They can guide you through the steps to secure a loan that suits your needs.

What should I consider before making any financial decisions based on this article?

It’s essential to consider your financial situation and consult with professionals before making any decisions, as the article contains general information that may not apply to your specific circumstances.

We’d love to help you take that first step towards buying your very own home. Give us a call to discuss how we can make the home loan process simple and stress-free, so all you have to worry about is the house-hunting.

Phone: 1300 855 022

Email: clientservices@zippyfinancial.com.au

About the Author:

Connect with Louisa on Linkedin.

Louisa Sanghera is a Credit Representative (437236) of Mortgage Specialists Pty Ltd (Australian Credit Licence No. 387025).

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16 Ways the Government Should Tackle Housing Affordability

Housing Affordability

You might have noticed that property prices have skyrocketed over the past couple of years, to the point where a lot of first home buyers are now having real difficulties cracking the market.

But how is the government looking at addressing it?

A House of Representatives committee (made up of both Liberal and Labor MPs) tabled a report title ‘The Australian Dream’ in federal parliament outlining 16 ways to improve housing affordability and supply across the country.

We Have Summed Up All 16 Recommendations for You…

#1 – Replace stamp duty with land tax

States and territories should replace stamp duty with land tax. This should be implemented over time so that those who have already paid stamp duty, don’t face double taxation.

The report says this would increase housing turnover, remove any unnecessary obstacles to homeownership and stabilise government revenues.

In the meantime, a transition review is recommended, and states and territories should adjust stamp duty brackets to redress decades of stamp duty bracket creep.

#2 – First home buyers to use their super as security for home loans

The government should allow first home buyers to use their superannuation as security for home loans.

By using their superannuation balance as collateral for a home, without using the funds themselves as a deposit, thereby expanding the opportunity for home buyers. This would remove the largest barrier for home buyers – being the deposit.

The report warns this recommendation should only be implemented in conjunction with some of the other proposals on this list that increase housing supply. Otherwise, an increase in households’ ability to borrow would likely increase property prices.

#3 – Rent-to-own affordable housing

The government should implement schemes to encourage private sector partnerships to deliver rent-to-own or discount-to-market affordable housing. This will diversify the housing market as well as provide affordable housing options for low to medium income earners, please experiencing homelessness and those escaping domestic violence.

#4 – Increase urban density in appropriate locations

Specifically, areas well-serviced by under-used transport infrastructure.

#5 – Incentivise planning and property administration policies

Provide incentive payment to state and local governments to encourage better planning and property administration.

#6 – Pay states and localities to deliver more affordable housing

Grants could be in the form of cash or infrastructure

#7 – Adopt recommendations form the inquiry into homelessness

#8 – Increase the supply of critical housing such as crisis housing

#9 – Don’t mess with negative gearing

It is recommended that the government doesn’t change its current negative gearing policy.

#10 – Reform developer contributions

Work with state and territory governments to reform developer contributions, so value-adding and in-demand infrastructure is delivered.

#11 – Review the build-to-rent housing market

In particular, how it’s affected by current regulations and tax policies.

#12 – APRA to continue monitoring lending standards.

#13 – No changes to the RBA’s charter

Ensuring that house prices are not a specific objective of monetary policy.

#14 – Up-to-date forecast data

Implement ways to get more up-to-date forecast data on population, housing approval and completions.

#15 – Unlock new housing supply

Concessional loans to infrastructure projects and community housing providers that will unlock new housing, particularly affordable housing.

#16 – The most important thing… you don’t have to wait for the government to get the ball rolling on the above recommendations to help you crack the property market.

What is the Main Focus of the Article?

The article focuses on a report by a House of Representatives committee that outlines 16 ways to improve housing affordability and supply in Australia.

What is the Recommendation Regarding Stamp Duty?

The report recommends replacing stamp duty with land tax to increase housing turnover and stabilize government revenues.

How Can First Home Buyers Benefit According to the Report?

The report suggests that first home buyers should be allowed to use their superannuation as security for home loans, which would help them overcome the barrier of making a deposit.

What is the Rent-to-Own Affordable Housing Scheme?

The scheme encourages private sector partnerships to deliver rent-to-own or discount-to-market affordable housing, providing options for low to medium income earners.

What Does the Report Say About Negative Gearing?

The report recommends that the government should not change its current negative gearing policy.

How Can Zippy Financial Help with Housing Affordability?

Zippy Financial can help you find ways to overcome housing affordability issues and come up with a tailored financial plan.

If you would like to find out about ways to overcome housing affordability issues, get in touch – we would love to help you come up with a plan.

Phone: 1300 855 022

Email: clientservices@zippyfinancial.com.au

About the Author:

Connect with Louisa on Linkedin.

Louisa Sanghera is a Credit Representative (437236) of Mortgage Specialists Pty Ltd (Australian Credit Licence No. 387025).

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5% Deposit Scheme: Are You Single and Under 30?

The 5% Deposit Scheme has emerged as a beacon of hope for young, single Australians aspiring to step onto the property ladder. In a market where the dream of homeownership often seems elusive, this scheme offers a tangible pathway. As we navigate through 2023, let’s delve into how the First Home Loan Deposit Scheme and Home Loan Deposit Scheme continue to shape the prospects of homebuyers under 30.

The Current Housing Market Landscape

Today’s housing market presents a mixed bag of challenges and opportunities. While property prices continue to fluctuate, the demand for affordable housing solutions remains high, especially among young adults. The evolving dynamics of the market underscore the need for schemes like the 5% Deposit Scheme, which cater specifically to the needs of first-time buyers.

Updates to the 5% Deposit Scheme

Since its inception, the 5% Deposit Scheme has undergone several refinements to better serve its target demographic. The scheme, a cornerstone of government efforts to aid first-time buyers, now offers more streamlined processes and broader eligibility criteria. These updates aim to make homeownership more accessible to single individuals under 30, who often face unique financial challenges.

Success Stories in the Current Market

The real impact of the 5% Deposit Scheme is best illustrated through success stories. Across Australia, numerous young and single individuals have successfully navigated the property market, thanks to the scheme’s low deposit threshold. These stories not only inspire but also provide practical insights into leveraging the scheme effectively.

Navigating Challenges: Tips and Strategies

Despite its benefits, the 5% Deposit Scheme comes with its set of challenges. Potential applicants often grapple with understanding the nuances of the scheme and aligning it with their financial goals. Key strategies include thorough market research, financial planning, and seeking professional advice to ensure a smooth application process.

Thorough Market Research

Scheme Eligibility Assessment: Begin by thoroughly researching the eligibility criteria of the 5% Deposit Scheme. Understand the specific requirements and qualifications needed to participate in the scheme. This includes income thresholds, property value limits, and other relevant factors that may impact your eligibility.
Property Market Analysis: Conduct a comprehensive analysis of the property market, focusing on areas covered by the scheme. Assess the property values, growth trends, and market conditions to make informed decisions about the location and type of property you intend to purchase under the scheme.
Lender Comparison: Research and compare lenders participating in the scheme. Different lenders may offer varying terms, interest rates, and conditions. By understanding the offerings of different lenders, you can choose the one that aligns best with your financial situation and preferences.

Application Process Streamlining

Document Preparation: Streamline the application process by preparing all necessary documentation in advance. This includes proof of income, employment verification, credit reports, and any additional documents required by the lender or scheme administrators. Organized documentation expedites the application review.
Timeline Management: Manage your timeline effectively. Understand the key milestones in the application process, including property searches, loan approval, and settlement. Setting realistic timelines and adhering to deadlines ensures that you progress through the scheme smoothly and seize potential opportunities in the property market.
Continuous Communication with Stakeholders: Maintain open communication with all relevant stakeholders, including lenders, mortgage brokers, legal professionals, and scheme administrators. Regular updates and clear communication help address any potential challenges promptly, fostering a collaborative and efficient application process.

Maximizing the Benefits of the Scheme

To truly benefit from the 5% Deposit Scheme, applicants need to adopt a strategic approach. This involves assessing personal finances, understanding the long-term implications of a reduced deposit, and exploring various loan options. Proactive financial management and informed decision-making are crucial in maximizing the scheme’s advantages.

Expert Insights on the Deposit Scheme

Financial experts and mortgage brokers play a pivotal role in guiding applicants through the Deposit Scheme. Their insights on market trends, loan options, and financial planning are invaluable for first-time buyers. Consulting with professionals can provide clarity and confidence, helping applicants navigate the complexities of the scheme.

The 5% Deposit Scheme remains a vital tool for young, single Australians under 30 looking to own their first home. As the property market continues to evolve, staying informed and proactive is key. For those ready to embark on their homeownership journey, the First Home Loan Deposit Scheme and Home Loan Deposit Scheme offer a promising start.

What exactly is the 5% Deposit Scheme?

The 5% Deposit Scheme is a government initiative that allows first-time homebuyers, particularly those who are single and under 30, to purchase a property with only a 5% deposit, without the need for lenders’ mortgage insurance.

Who is eligible for the 5% Deposit Scheme?

The scheme is primarily targeted at single Australians under 30 who are first-time homebuyers. Eligibility criteria include income caps and property value thresholds, which vary based on location.

How does the 5% Deposit Scheme benefit young, single homebuyers?

The scheme makes homeownership more accessible by reducing the required deposit amount, allowing young and single buyers to enter the property market sooner than they might otherwise be able to.

Are there any income or property price limits for the scheme?

Yes, the scheme has specific income and property price caps. These limits are designed to ensure the scheme helps those who need it most and vary depending on your location and the property market.

Can I apply for the scheme if I’m over 30?

While the scheme is particularly beneficial for those under 30, it’s not exclusively for this age group. Eligibility depends on meeting other criteria like being a first-time buyer and income thresholds.

How does the 5% Deposit Scheme compare to other first-home buyer incentives?

The 5% Deposit Scheme is unique in its low deposit requirement. Other incentives might include stamp duty concessions or grants, which can be used in conjunction with this scheme for additional benefits.

So, if you are a first home buyer looking to crack into the property market sooner rather than later, get in touch today and we can explain the scheme to you in more detail, check if you are eligible and help you apply through a participating lender.

Phone: 1300 855 022

Email: clientservices@zippyfinancial.com.au

About the Author:

Connect with Louisa on Linkedin.

Louisa Sanghera is a Credit Representative (437236) of Mortgage Specialists Pty Ltd (Australian Credit Licence No. 387025).

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Buying Property Could Be Cheaper Than Renting

For many Australians, rate hikes and inflation have made the dream of property ownership feel ever more distant, but a recent analysis shows that meeting mortgage repayments could be cheaper than renting for more than a third of Australian properties.

Often the biggest obstacle in the way of home ownership is saving up for a deposit, but once you have got that sorted, a recent CoreLogic analysis found servicing a mortgage was more affordable than average rent prices in 518 Australian suburbs.

In fact, in some areas there were savings of over $900 a month. Not to mention that with rental prices surging by about 10% across Australia over the past year and vacancy rates at a record low of 1.1%, home ownership has possibly never looked more appealing!

Some Tips to Help You Switch from Renter to Homeowner in Timely

Take Advantage of the Buyer’s Market

Buying now or in the near future could mean less competition for properties, price drops and sellers willing to negotiate. And recent rate hikes mean that, even during the spring selling season, we are seeing fewer buyers.

In fact data shows the median number of days that properties sit on the market is now 35, compared to 20 days last year. And in response, property prices are falling, September data showed a 1.4% drop.

So, by shopping around in the right areas and putting your negotiator hat on, you may get a price that could make buying cheaper than renting. And most importantly, property investment and making mortgage repayments can create equity for you … instead of your landlord.

Get in on Government Schemes

There’s no denying that saving a big enough deposit to buy can be a bit of a slog. But what if there was a way to sidestep the standard 20% deposit? And possibly avoid stamp duty too?

There are a number of government schemes you may be eligible for that can fast-track house buying by an average of 4 to 4.5 years.

The federal government offers low deposit, no LMI loans for eligible first home buyers, single parents and regional first home buyers. Also, all state governments (except for South Australia) have first home buyer stamp duty concessions for those eligible.

And you can stack these schemes together for more bang for your buck. But you need to move quickly on the no LMI schemes as they are allocated on a first come, first-serves basis every financial year.

Is buying property more affordable than renting in Australia?

The article suggests that for more than a third of Australian properties, meeting mortgage repayments could be more affordable than paying rent. This is especially significant given the recent surge in rental prices by about 10% across Australia.

What is the main obstacle to homeownership?

One of the primary challenges for potential homeowners is saving up for a deposit. However, once this is achieved, the cost of servicing a mortgage might be more affordable than average rent prices in many Australian suburbs.

How have recent changes in the property market made buying more appealing?

With rental prices surging and vacancy rates at a record low of 1.1%, homeownership has become more attractive. Additionally, some areas offer savings of over $900 a month when comparing mortgage repayments to rent.

Are there any government schemes to assist potential homeowners?

Yes, there are several government schemes available that can fast-track the process of buying a house by an average of 4 to 4.5 years. These schemes offer benefits like low deposit, no LMI loans for eligible first home buyers, single parents, and regional first home buyers. Additionally, most state governments offer first home buyer stamp duty concessions.

How can shopping around benefit potential homeowners?

By shopping around in the right areas and negotiating, you may get a price that could make buying cheaper than renting. And most importantly, buying property and making mortgage repayments can create equity for you, instead of your landlord.

What is the significance of the recent rate hikes in the property market?

The recent rate hikes have led to fewer buyers in the market, resulting in properties staying on the market for longer periods. This has caused property prices to drop, making it a potential buyer’s market.

Give us a call

Are you keen to make the leap from renter to homeowner? If so, you will be busy researching the market and learning the art of the deal, so why not get a helping hand with your finances?

We can help find the right loan for you and provide you with helpful guidance that could increase your chances of a successful mortgage application. And while we are at it, we can assist you in applying for any money-saving government incentives too.

Phone: 1300 855 022

Email: clientservices@zippyfinancial.com.au

About the Author:

Connect with Louisa on Linkedin.

Louisa Sanghera is a Credit Representative (437236) of Mortgage Specialists Pty Ltd (Australian Credit Licence No. 387025).

First Home Buyers Build $82,000 in Equity with Minimal Deposit

From $35,00 deposit to $82,000 home equity

What is the Home Guarantee Scheme?

Want to crack the market sooner?

RELATED ARTICLES

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First Time Buyers: Your Time is Now

Frequently Asked Questions

Why is now a good time for first-time homebuyers?

How have the latest rate cuts impacted loan affordability?

How do the new loan rates compare to current rent prices?

What are the benefits of home ownership?

How can Zippy Financial help first-time homebuyers?

What should I consider before making any financial decisions based on this article?

RELATED ARTICLES

Service Locations

16 Ways the Government Should Tackle Housing Affordability

Housing Affordability

We Have Summed Up All 16 Recommendations for You…

Frequently Asked Questions

What is the Main Focus of the Article?

What is the Recommendation Regarding Stamp Duty?

How Can First Home Buyers Benefit According to the Report?

What is the Rent-to-Own Affordable Housing Scheme?

What Does the Report Say About Negative Gearing?

How Can Zippy Financial Help with Housing Affordability?

RELATED ARTICLES

Service Locations

5% Deposit Scheme: Are You Single and Under 30?

The Current Housing Market Landscape

Updates to the 5% Deposit Scheme

Success Stories in the Current Market

Navigating Challenges: Tips and Strategies

Thorough Market Research

Application Process Streamlining

Maximizing the Benefits of the Scheme

Expert Insights on the Deposit Scheme

Frequently Asked Questions

What exactly is the 5% Deposit Scheme?

Who is eligible for the 5% Deposit Scheme?

How does the 5% Deposit Scheme benefit young, single homebuyers?

Are there any income or property price limits for the scheme?

Can I apply for the scheme if I’m over 30?

How does the 5% Deposit Scheme compare to other first-home buyer incentives?

RELATED ARTICLES

Service Locations

Buying Property Could Be Cheaper Than Renting

Some Tips to Help You Switch from Renter to Homeowner in Timely

Take Advantage of the Buyer’s Market

Get in on Government Schemes

Frequently Asked Questions

Is buying property more affordable than renting in Australia?

What is the main obstacle to homeownership?

How have recent changes in the property market made buying more appealing?

Are there any government schemes to assist potential homeowners?

How can shopping around benefit potential homeowners?

What is the significance of the recent rate hikes in the property market?

Give us a call

RELATED ARTICLES

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