How to buy property from July 1 with just a five per cent deposit
First-home buyers have been given a second chance to buy a property with just a five per cent deposit. Here’s how you can do it.
Money
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First-home buyers should act swiftly to take up the Federal Government’s scheme which restarts on Wednesday allowing those with just a five per cent deposit to buy a home.
The first 10,000 spots rolled out in the first half of the year were filled and a majority were taken out by singles (58 per cent) – the average income of successful applicants was $66,500 while couples had a combined income of $109,400.
And in the first tranche, there was a mix between the number of applicants snapping up properties in the state’s capital cities and outer regions.
The average deposit amount saved up was just seven per cent.
Bendigo Bank’s executive of consumer banking Richard Fennell urged borrowers to act quickly to avoid missing out.
“Make sure you have your income information ready to provide to the bank to prove your eligibility and also to have a minimum of a five per cent deposit saved up,” he said.
“Also have idea of what sort of property you want to apply for because there are maximum values that you can buy using the scheme.”
First-home buyers Freya Nord-White, and her partner David MacHugh, both 25, used the scheme to purchase a three-bedroom home for $520,000 in Skye, 38km southeast of Melbourne.
The pair had about $30,000 saved up.
“It came at a good time because we bought the time and have been in isolation since,” Ms Nord-White said.
“We planned on buying towards the end of this year but this allowed us to get in sooner.”
Under the scheme singles must have a taxable income in the 2019/20 financial year less than $125,000, while couples must not earn more than $200,000.
Successful applicants only need a minimum five per cent deposit saved up — the government acts as a guarantor for the remaining 15 per cent.
This means the purchasers avoid the hefty lenders’ mortgage insurance – a cost that protects the lender not the borrower if there is a default on the loan.
Applicants need to provide a copy of the notice of assessment from the ATO to their bank from the 19/20 financial year, but while waiting for this they can register their interest in the scheme with banks offering these loans.
The National Housing Finance and Investment Corporation’s chief executive officer Nathan Dal Bon, CEO said despite COVID-19 “we anticipate that there will be continued demand for these new 10,000 places.”
“We encourage potential first homebuyers interested in the Scheme to contact participating lenders and have their financial paperwork ready,” he said.
The Federal Housing Minister and Assistant Treasurer Michael Sukkar said the scheme had been “incredibly successful” in its first year.
He expects to be strong demand in the second round of spots which are available by 27 lenders including two of the big four banks – the Commonwealth Bank and National Australia Bank.