Here at Ian Reid Buyer and Vendor Advocates, we are called on to assist all types of home buyers in all sorts of markets. However, it’s fair to say that the high degree of competition between buyers in the current market is certainly raising some challenges for first home buyers, and or team is responding to these challenges with a pleasing degree of success.
With this in mind, we wanted to point out that there is a new Victorian Government assistance program which is designed to help those buyers with a low deposit to get into the market.
What many Victorians may not be aware of is that there are actually two separate programs that are designed to help people with lower deposits, giving buyers in this situation a choice of the Victorian Homebuyer Fund and the Federal Government’s First Home Loan Deposit Scheme.
Whilst both programs can assist a homebuyer with a deposit as low as 5 per cent to buy a property, (as opposed to the 20 per cent deposit that is usually needed to avoid Lender’s Mortgage Insurance), they work differently and different buyers will find that one scheme or the other may work better for them, depending on their circumstances.
In brief, the Victorian scheme allows you pay a 5% deposit and take out a mortgage for 70% of the property, leaving the government to effectively ‘own’ the remaining 25% of the home. In contrast, the Federal scheme effectively ‘guarantees’ your loan, even though your mortgage would be for 95% in the same situation.
Based on the above, your mortgage repayments will be a lot less with the Victorian scheme as your loan is for a lower amount. However, the other side of the equation is that when you sell the property down the track, part of the sale price goes to the government in the Victorian scheme because they own part of the property.
There are also other differences between the schemes. For example, the Victorian program allows for higher purchase prices, and is open to some other buyers who may not be first home buyers. A single parent who may not otherwise qualify for a loan is a prime example.
So, whilst we are not in the business of providing financial advice to buyers, our strong recommendation to first home buyers in this situation is to seek qualified independent advice before you commit to either program. That way you can go into it with your eyes open, fully aware of the long-term consequences of your choice.
Keep in mind that the team at Ian Reid are ready and able to assist you in all your property dealings, whether you are a first home buyer or not. Why not give us a call on 9430 0000 today to discuss your options?
Of course, you’ll also find plenty of helpful suggestions when you’re selling for in our free booklet, “Fatal Real Estate Traps Exposed”.