MY TWO CENTS ON THE FIRST HOME LOAN DEPOSIT SCHEME

A new scheme from the Federal Government will allow first-time homebuyers to purchase a property with as little as a 5% deposit. The $500 million scheme was a key election promise, but it doesn’t seem to be the generous leg-up it was hyped to be.

The $500 million scheme was a key election promise. However, now that the details of the program are being revealed, it doesn’t seem to be the generous leg-up it was hyped to be.

And as is often the case: if it seems too good to be true, it probably is.

Here’s my take on the First Home Loan Deposit Scheme

The First Home Loan Deposit Scheme (FHLDS) seems like a good idea – at first glance.

Unlike shared equity schemes we’ve seen in the past, like HomesVIc, it provides homebuyers with a guarantee against the remaining 15 per cent of their deposit.

However, I don’t know that the program is going to have the impact that first homebuyers hoped for.

It will be limited to just 10,000 participants per year, on a first-come, first-served basis. With around 110,000 first homebuyers purchasing properties each year, it’s barely a drop in the ocean, with less than 10% of buyers able to benefit from this scheme.

It means that the yearly allocation is likely to be exhausted in mere months, or perhaps even weeks, so it may not even be an option for those looking to buy a property in the latter half of the year.

How Much Can You Spend Under he Scheme?

This is where the real issue with this scheme arises.

First homebuyers should be aware of the price caps that are set with the FHLDS.

These caps set a limit on the value of the homes you are able to purchase under the scheme.

At present, these limits are set at just $700,000 for a home in Sydney and $600,00 for a home in Melbourne. This will do practically nothing to help anyone in Sydney – my clients here would be jumping for joy if they could find a decent first-home for sub $700,000.

It seems a ridiculous, arbitrary amount to set as a cap. You can certainly forget living anywhere near the CBD.

Do You Have Your Deposit Ready to Go?

Meanwhile, anyone hoping to score one of these elusive 10,000 spots will need their 5 per cent deposit stashed away and accessible, with all their paperwork and supporting documents ready to go, or they risk missing out.

Another thing to keep in mind is that buying a property with just a 5 per cent deposit, particularly in those markets that are cooling after a massive boom, could be risky.

Yes, the government is guaranteeing the remaining 15 per cent of your deposit, so you don’t need to pay LMI – this is great. But the fact still remains that you’ve only contributed 5 per cent to the purchase price. You don’t have 20 per cent equity, you have 5 per cent equity. House prices don’t need to fall very far for you to end up in negative equity, and on the flip side, they’d have to grow pretty darn fast for you to gain any decent ground. And you’re not paying back 80 per cent of the purchase price, you’re paying 95 per cent, so your repayments could be huge.

Have you considered the bigger picture?

Something else I’ve heard bandied around a lot in relation to this scheme is the concern that if you can’t save up more than a 5 per cent deposit, can you even really afford to own a home?

I get it: paying rent while saving is hard work, and you’re probably forking out close to what your mortgage repayments will be in between rent and savings right now anyway. But owning a home involved more expenses than just the mortgage.

You’ll have council rates to pay, to the tune of a couple of thousand dollars a year, and water rates, too. There is also building insurance and possibly strata or body corporate fees. Things around the home break, and there’s no landlord to call to get them fixed.

What is the First Home Loan Deposit Scheme?

The First Home Loan Deposit Scheme is a government initiative aimed at supporting eligible first home buyers in purchasing a home sooner. It allows first home buyers to purchase a home with a significantly lower deposit than usually required.

Who is eligible for the First Home Loan Deposit Scheme?

Eligibility for the scheme is subject to several criteria including income caps, property price thresholds, and being a first-time home buyer. It’s essential to review the specific eligibility requirements or consult with a financial advisor to determine individual eligibility.

How does the First Home Loan Deposit Scheme benefit first home buyers?

The scheme benefits first home buyers by allowing them to purchase a home with a deposit as low as 5%, without needing to pay for Lenders Mortgage Insurance, potentially saving them a substantial amount of money.

Can the First Home Loan Deposit Scheme be used in conjunction with other government grants and schemes?

Yes, the First Home Loan Deposit Scheme can typically be used in conjunction with other government grants and schemes, such as the First Home Owner Grant, allowing buyers to maximize their benefits.

How can Zippy Financial assist with the First Home Loan Deposit Scheme?

Zippy Financial can provide expert advice and guidance on the First Home Loan Deposit Scheme, helping first home buyers understand their options, eligibility, and the application process, ensuring a smooth and informed home-buying experience.

Are there any restrictions on the type of property that can be purchased under the First Home Loan Deposit Scheme?

Yes, there are restrictions and property price thresholds that vary depending on the location of the property. It’s crucial to be aware of these limitations and consult with a financial advisor or mortgage broker to explore suitable options within the scheme’s parameters.

My advice? Keep saving. And if you’re really keen to get into the property market, speak to your mortgage broker today about your options. With a solid savings plan and some strategies to get ahead financially, you could be well on your way to home ownership, regardless of whether you’re successful with the First Home Loan Deposit Scheme or not.

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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Explainer: Open Banking, and What It Means for You

Do you know what Open Banking is, or how it’s set to impact you? Open Banking could be just about the biggest thing that’s happened in the Australian finance industry this century – so it’s probably a good idea that you have an understanding of exactly what it is, and what it means for you.

Regulatory changes, tech-driven innovation and evolving consumer preferences have all led to this new development, which will make the usually quite secretive and hard-to-navigate finance world much more accessible to the average person.

Essentially, Open Banking gives consumers unprecedented access to, and power over, their data.

In a nutshell, you’ll be able to share your selected banking data with accredited third parties (a process known as read access) and benefit from the new products, services and competition this change will generate.

But why is Open Banking important? How did it come about – and what will the end result be for borrowers?

The Open Data Economy

Open Banking forms part of the Consumer Data Right (CDR), which was passed by the Federal parliament in August 2019 and covers the telecommunications, utilities and banking industries.

That’s a real mouthful, but what this legislation represents is a major step towards an open data economy in our increasingly interconnected, online world. The UK and the European Union are already enjoying the benefits of Open Banking systems, so it’s about time we caught up!

The ACCC has given the four major banks from the 1st of February 2020 to the 1st of July 2020 to implement the sharing of consumer data, and will review the rest of the rollout through the year. Other banks and lenders will be ringing in the changes from 2021.

Savings accounts, term deposits and credit cards will be among the first products to join the Open Banking ranks, followed by mortgages and personal loans, and eventually business and investment accounts, retirement savings accounts and trusts.

By 2022, we should have a fully-functioning Open Banking system, and the ACCC will move on to applying the CDR to other sectors such as utilities.

True Transparency

Open Banking is a much more transparent system than we currently have. You will be able to instruct your bank to send your data to other banks, financial institutions and authorised organisations, so that signing up for a new mortgage, personal loan, credit card or bank account will be much simpler.

Instead of chasing up personal indentification documents or printing out page after page of transaction records, you will be able to direct your bank to send your data directly to the new institution on your behalf – a massive time-saver.

You will also find that the process of comparing products and services should become much easier. Working with an experienced and qualified mortgage broker remains the most effective way to get the best possible loan for your situation, as we are in the industry being updated on the latest market changes and credit card movements every day, which means we can direct you towards the loan product (and the lender) that best suits your needs.

However, Open Banking is a massive step in the right direction for a more robust and competitive banking industry overall, and I think we can all agree, that’s good news for borrowers.

The Nitty Gritty: Did You Know?

Relevant privacy legislation applies to Open Banking, and you are always in control of your data – organisations you are involved with can only send or receive your information at your request, and must be authorised under the government’s strict security protocols.

The CDR doesn’t allow for what’s known as write access – that is, you won’t be able to authorise accredited third parties to initiate payments or change account providers on your behalf. While this is part of the legislation in the UK and EU, and may be on the cards here in the future, for now Open Banking is purely a matter of data sharing.

What is the impact of consecutive rate hikes on household budgets?

Open Banking refers to a system where banks and other financial institutions provide access to consumer banking, transaction, and other financial data through the use of application programming interfaces (APIs). It allows third-party developers to build applications and services around the financial institution, enhancing consumer choice and competition.

How long does it take for a rate rise to affect my mortgage repayments?

Open Banking empowers consumers by giving them control over their financial data. It enables them to share their financial information securely with third-party providers, allowing them to access better financial products, services, and deals tailored to their needs and financial situations.

What can I do to prepare for rate hikes?

Yes, Open Banking uses advanced security measures, including encryption and secure APIs, to protect consumer data. Consumers have control over which data is shared and with whom, ensuring their financial information is safeguarded.

How does the RBA’s cash rate affect my mortgage rate?

Open Banking offers financial service providers the opportunity to access a wealth of consumer data, enabling them to create more personalized and efficient services. It fosters innovation and competition in the financial sector, leading to the development of new products and services.

Are there any strategies to mitigate the impact of rate hikes?

Yes, participation in Open Banking is entirely voluntary. Consumers have the choice to share their financial data and can decide which information they want to share and with which service providers.

How does Zippy Financial view Open Banking?

Zippy Financial sees Open Banking as an opportunity to enhance financial services and products for consumers. It allows for a more tailored approach to financial solutions, enabling consumers to make more informed decisions and access better deals and services based on their individual financial situations.

Look out for consumer education campaign coming this year, which is designed to help you work out how Open Banking will impact you, or chat to your broker or financial planner for more information.

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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Controlling the Cash Flow

Money comes and money all too quickly goes. But if you are not keeping track off the flow of your bank account, you are making a pretty simple financial mistake: no cash-flow control. And it is something that will end up costing you dearly.

With Christmas approaching, there is no better time to organise your family’s financial plan and to manage those seasonal expenses. By getting on top of the boring day-to-day transactions that dictate your bank balance, you will find that your monthly budget will start to run itself, leaving you more time and money to spend on life’s fun stuff.

You will:

Save Money – by not slipping into the red, you will save on bank charges and avoid having to pay high interest rates. Most utility companies also offer prompt-payment discounts.

Save Time – automatic payments and direct debits mean you will spend less time online banking and shuffling piles of paper bills each month.

Stop Worrying – by knowing down to the last cent how much you have to spend each month, it will help you match your spending to your budget, leading to fewer sleepless nights stressing about the state of your finances.

Start Saving – a financial roadmap will help you navigate a long-term savings plan.

Five Easy Stages to Managing Your Cash Flow

1. Start Your Plan

set aside a quiet half-hour, grab a pen and paper and write down what you have coming in every month and what you need to pay out.

2. Look Ahead

plan for a whole year. Include every essential utility and bill: rent/mortgage, water and electricity, rates, insurance, school fees, work-travel/car costs etc.

3. Bank Clever

set up different bank accounts: rent/mortgage, bills, savings and your everyday living expenses. After you are paid each month, move your funds into your different accounts, and leave the money there.

4. Direct Debits

ensure all your essential bills are paid using automatic payments. Big bills, such as insurance, can be spread throughout the year to ease the pain. By automatically moving your money to your different accounts at the start of the month, you will never have to worry about missing payments again.

5. Put it on the House

if you have personal loans, talk to your trusted mortgage broker about consolidating them onto your home loan. Bank mortgage rates are very low, and are likely to remain that way for a while. Not only will you streamline your monthly cash flow, you will save money too.

By clearing the decks of all your essential bills each month, you will know exactly what you have to spend on day-to-day living expenses, the small luxuries that make the daily grind less grinding, and the occasional mall-splurge on your plastic.

A fear of the financial future is really just a fear of the unknown. By defining your budget and getting to grips with your cash flow, you will be able to look forward to a brighter and more prosperous year.

What is Cash-Flow Control?

Cash-flow control refers to the practice of tracking the inflow and outflow of money in your bank account. It helps you avoid financial mistakes and enables you to manage your monthly budget effectively.

How can I start managing my cash flow?

Set aside a quiet half-hour to write down your monthly income and essential expenses. Plan for a whole year and include every essential utility and bill.

What are the benefits of managing my cash flow?

Managing your cash flow can help you save money by avoiding bank charges and high-interest rates. It also saves time as you can set up automatic payments and direct debits, and reduces stress by helping you match your spending to your budget.

How can I organize my bank accounts for better cash flow management?

Setting up different bank accounts for rent/mortgage, bills, savings, and everyday living expenses is recommended. After you get paid each month, move your funds into these different accounts.

What is the role of direct debits in cash flow management?

Direct debits ensure that all your essential bills are paid automatically. This helps you avoid missing payments and keeps your finances in order.

Can I consolidate my personal loans onto my home loan?

Yes, talking to your trusted mortgage broker about consolidating personal loans onto your home loan can streamline your monthly cash flow and potentially save you money.

Ready to take control of your finances? Contact Zippy Financial today for expert guidance and unlock a world of better financial choices.

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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Are You Having Trouble Managing Multiple Debts?

By consolidating your debt, you can take some pressure off your monthly finances.

Here is a quick experiment…

Go pick up three balls and try and juggle them. Most people, besides those who ran away to join a circus, will likely drop at least one of them within a few tosses. Now put two of the balls aside and throw the remaining up and down with one or both hands… that is much easier to manage, right?

Well, this is not too dissimilar to the concept of debt consolidation. If you have more than one loan – for example, a credit card, a car loan and/or a personal loan – you can reduce the stress of juggling multiple debts, payment dates and interest rates by rolling them into one easy-to-manage loan.

There are Other Benefits Too

One common debt consolidation method is to take out a new personal loan and use the funds to pay off your other existing debts.

If the interest rate on the new personal loan is lower than the interest rate on your existing debts (for example, a credit card with a 17.99% interest rate) this can help your pay less interest each month and avoid the nasty late payment fees that come with these kinds of cards.

By rolling all your debts into one, you can get a clearer timeline of when you can be debt-free.

Debt consolidation can also make it easier for you to manage your household budget, as you only need to factor in repayments from one debt per month instead of many.

Refinancing your Home Loan for Debt Consolidation

Another method used for debt consolidation is rolling it into a refinanced home loan because mortgages offer comparatively low interest rates.

If you are struggling with multiple debts right now, consolidating your debts into your home loan will, in most cases, reduce your overall monthly repayments.

But there is a big word of warning…

Whilst this option can reduce your monthly repayments now, debt consolidation through your mortgage can turn a short-term debt (such as a personal loan) into much longer-term debt.

So, unless you aim to make a lot of extra repayments as soon as possible, you could end up paying significantly more interest than you would have otherwise. One way to address this issue is to create a loan split for the debt consolidation, giving you the ability to pay off all the short-term debts within a few years rather than for example over a 25-year home loan period.

If you would like to explore your debt consolidation or refinancing options, then get in touch with Zippy Financial today, and we can help you look at ways to take off some financial pressure.

Whatever your circumstances, we are here to support you however we can!

What is Debt Consolidation?

Debt consolidation is the process of combining multiple debts into a single loan, making it easier to manage repayments and potentially saving you money on interest rates.

How Can Debt Consolidation Help Me?

By consolidating your debts into a single loan with a lower interest rate, you can reduce your monthly payments and avoid late fees associated with high-interest debts like credit cards.

What are the Benefits of Using a Personal Loan for Debt Consolidation?

Using a personal loan for debt consolidation can provide you with a clearer timeline for becoming debt-free. It can also simplify your household budget, as you’ll only need to make one payment per month.

Can I Use My Home Loan for Debt Consolidation?

Yes, you can refinance your home loan to include your other debts. This is often advantageous because home loans typically have lower interest rates.

What are the Risks of Using a Home Loan for Debt Consolidation?

While using a home loan can reduce your monthly payments, it can turn short-term debts into long-term debts. This means you could end up paying more interest over time unless you make extra repayments.

How Can Zippy Financial Help Me with Debt Consolidation?

Zippy Financial offers tailored financial solutions to help you consolidate your debt and achieve financial peace of mind.

Get in Touch

Get in touch with Zippy Financial today for tailored financial solutions. Consolidate your debt and simplify your finances. Say goodbye to juggling multiple debts and hello to financial peace of mind. Contact us now!

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).

MY TWO CENTS ON THE FIRST HOME LOAN DEPOSIT SCHEME

Here’s my take on the First Home Loan Deposit Scheme

How Much Can You Spend Under he Scheme?

Do You Have Your Deposit Ready to Go?

Frequently Asked Questions

What is the First Home Loan Deposit Scheme?

Who is eligible for the First Home Loan Deposit Scheme?

How does the First Home Loan Deposit Scheme benefit first home buyers?

Can the First Home Loan Deposit Scheme be used in conjunction with other government grants and schemes?

How can Zippy Financial assist with the First Home Loan Deposit Scheme?

Are there any restrictions on the type of property that can be purchased under the First Home Loan Deposit Scheme?

RELATED ARTICLES

Service Locations

Explainer: Open Banking, and What It Means for You

The Open Data Economy

True Transparency

The Nitty Gritty: Did You Know?

Frequently Asked Questions

What is the impact of consecutive rate hikes on household budgets?

How long does it take for a rate rise to affect my mortgage repayments?

What can I do to prepare for rate hikes?

How does the RBA’s cash rate affect my mortgage rate?

Are there any strategies to mitigate the impact of rate hikes?

How does Zippy Financial view Open Banking?

RELATED ARTICLES

Service Locations

Controlling the Cash Flow

Five Easy Stages to Managing Your Cash Flow

1. Start Your Plan

2. Look Ahead

3. Bank Clever

4. Direct Debits

5. Put it on the House

Frequently Asked Questions

What is Cash-Flow Control?

How can I start managing my cash flow?

What are the benefits of managing my cash flow?

How can I organize my bank accounts for better cash flow management?

What is the role of direct debits in cash flow management?

Can I consolidate my personal loans onto my home loan?

RELATED ARTICLES

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Are You Having Trouble Managing Multiple Debts?

There are Other Benefits Too

Refinancing your Home Loan for Debt Consolidation

What is Debt Consolidation?

How Can Debt Consolidation Help Me?

What are the Benefits of Using a Personal Loan for Debt Consolidation?

Can I Use My Home Loan for Debt Consolidation?

What are the Risks of Using a Home Loan for Debt Consolidation?

How Can Zippy Financial Help Me with Debt Consolidation?

Get in Touch

RELATED ARTICLES

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