A further 10,000 places were announced for the 5 per cent deposit scheme, for which the government guarantees another 15 per cent. That means you can borrow 95 per cent of a property’s value but what the guarantee does is avoid the cost of extortionate lenders’ mortgage insurance. This can be tens of thousands of dollars.
The scheme will apply if your household income is less than $125,000 a year. But you should get in quick as the concessional loans have been going fast.
The other newer initiative of note is the expansion of the first home super saver scheme.
With this one, you can tip extra money into your superannuation fund that is allocated specifically for a house purchase.
You can already pay in up to $30,000 but from July, 2022, the allowable amount will rise to $50,000. You can save this over two years and then withdraw it, plus earnings and less tax.
Inside your super, the tax is lower than your marginal tax rate, so you would amass money for a deposit more quickly.
The above measures add to first-home buyer grants and stamp duty waivers that are available, which differ by state, but can apply to homes you build or buy new. For more information, visit your relevant Office of State Revenue website.
The market is rather manic and you must guard against letting that pressure you into borrowing more than you can afford.
Ordinarily, I would advocate saving a 20 per cent deposit to avoid lenders’ mortgage insurance.
However, in capital city markets, where prices are rising by as much as $400 a day, that looks unrealistic. A more reasonable deposit is probably 10 per cent of the purchase price.
Still, make sure borrowing that amount would not put you into mortgage stress – defined as committing more than one-third of your before-tax household income to housing.
Be aware that under bank lending restrictions, a lender may “stress test” whatever you borrow for 2.5 percentage points of interest rate rises. That could reduce your capacity to borrow.
To make sure you are relaxed and comfortable with what you borrow, just calculate one-third of your after-tax income. You could then jump on an online mortgage repayment calculator and play with what loan size that amount of monthly repayments would cover.
Perhaps use an interest rate of 2 per cent, although the best quality loan in the market with a mortgage offset account is just 1.89 per cent.
Do your utmost to limit your borrowings. And, most importantly, remember that the time to buy is when you are ready – not when rushed.
Article Source: www.brisbanetimes.com.au