The Federal Government has now produced details on it’s election promise of a Government Home Buyers Assistance Scheme which is set to start on 1st January 2020.

If you were to purchase a home today, you’d most likely need to have 20% of the property’s value saved as a deposit to secure a home loan or pay Lenders Mortgage Insurance.

Eligible buyers will be able to purchase with a 5% deposit without the need for lenders mortgage insurance. The scheme to assist some of the 100,000 first home owners entering the market each year will only benefit 10,000 per annum and comes with a varying price cap on property purchase price determined by where you are purchasing.

Applicants will also have to have earned less than $125,000 as a single applicant and $200,000 as a couple in the previous financial year.

The scheme will be allocated on a first come, first serve basis, Housing minister Michael Sukkar says that while there’s no set number of deposit guarantees per state, the government will keep a close eye on demand to further shape the scheme. “We’re not adding any layers of bureaucracy,” he told reporters. “These are guarantees that banks are able to offer to customers. The banks will undertake the same credit checks, the same lending criteria that they would otherwise.”

So, what are the real benefits of the scheme?

• Get on the property ladder quicker
• Save on lenders mortgage insurance. Based on a $400,000* purchase in WA, with a 95% loan this could save between $12,312* and $14,600* depending on the lenders mortgage insurance premium (as these are different with each lender – some use their own insurance, QBE or Genworth)

And the cons…

• Restricted to purchases under $400,000
• May pay a slightly higher interest rate as many lenders have a rate loading for loans with loan to value ratios higher than 80%

*Figures are for general information only and are based on a qualifying purchase at $400,000 and the purchaser being an Australian citizen/permanent resident and also being eligible for the First Home Owners Stamp Duty Rebate. Lenders mortgage insurance premiums vary form lender to lender and premiums vary dependent on loan to value ratio.

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