First home buyers are showing great interest in the federal government’s First Home Loan Deposit Scheme, which is both good news and bad news.
The good news is the government has made it easier for eligible participants to enter the market, by allowing them to buy a property with just a 5% deposit. Crucially, buyers don’t have to pay lender’s mortgage insurance (LMI), because the government acts as guarantor on their loan.
The bad news, though, is that the First Home Loan Deposit Scheme has only 10,000 spots per financial year – and more than half have already been snapped up.
Half the spots were made available to the two participating big banks (Commonwealth Bank and NAB); all those spots have been taken. The other half were reserved for 25 smaller lenders; some of those spots are still available.
In a typical year, about 100,000 first home buyers enter the market, so the government is helping just a fraction.
Now the Good News- Buyers can borrow 100% of the purchase price
Thankfully, there’s a fallback option for first home buyers who miss out on the First Home Loan Deposit Scheme.
That option is 100% Funding, an exciting product that has been developed in-house by Acuity Funding.
The 100% Funding product allows first home buyers (and investors, new migrants and other borrowers) to enter the market with a 0% deposit – yes, really.
100% Funding is offered by developers to prospective buyers. Here’s how it works:
Buyers get 80% of their finance through a traditional mortgage, from a mainstream lender
Buyers get their 20% deposit through a second loan, from Acuity Funding Lending Trust
Acuity is helping buyers fulfil the great Australian dream
As you can see, the 100% Funding product may be a great option for buyers who are struggling to enter the market.
It’s also helpful for developers, because it makes it easier for potential buyers to get finance.
I’m happy the government introduced the First Home Loan Deposit Scheme on January 1 this year. But for first home buyers who fall through the cracks – and other buyers as well – it’s important we have other finance options to allow them to fulfil the great Australian dream of property ownership.