Milestone has had a significant number of enquiries from our clients over the past few months asking for ideas on how to either get into the property market for the first time or from parents wanting to help their children enter the property market, we believe the level of enquiry has been driven by higher rental demand and the fast moving property market, therefore we sat with Milestones resident finance expert Gillian, who came up with the following ways to secure finance to help enter the property market.
First Home Guarantee Scheme
Government Scheme to assist First Home Buyers, to enable them faster and easier access to the property market.
Only a 5% deposit is required and Government will underwrite the loan so the borrower/s do not have to pay Lenders Mortgage Insurance (insurance premium Banks charge when you have a deposit under 20%).
For example, the purchase price is restricted to $750,000.00 in the ACT and therefore you would require a deposit of $37,500.00 (5%).
The scheme is only open to Australian Citizens, Singles with an income of up to $125,000.00 and Couples up to $200,000.00 and runs through until 30 June 2025.
Fact Sheet attached with more detail.
There are also stamp duty concessions (dependant on your overall income) for First Home Buyers in the ACT. This applies to all properties up to the value of $1M.
Family Guarantee Loan
Parents can assist their Children by using the available equity in their property. The Finance is structed in two loans and borrower/s are responsible for the repayments of both loans.
For example, Loan 1 – 80% value of the property purchase price. Purchase price $750,000.00 = $600,00.00 loan amount. This loan will be against the property being purchased.
Loan 2 – remaining amount required. $150,000.00, to pay for the 20% deposit (some Banks will allow you to include the stamp duty/legals costs are well). This loan would be against the purchase property and Guarantors property.
The Guarantor provides a Guarantee limited to the amount they are liable for, in this example $150,000.00 and would be obligated to make the loan repayments on this loan if for some reason the Borrower could not.
Banks generally require Guarantors to seek Independent Legal Advice to ensure they are aware their rights and obligations under the Guarantee arrangement (cost for this advice would be the Guarantors care).
Note: Guarantors need to be aware that the amount they are guaranteeing may be taken into account if they want to borrow funds for their own use in the future (could affect their borrowing capacity).
In essence this means the purchaser would be borrowing 100% of the purchase price and alleviate the need to save funds.
Gift
Funds can be gifted to the Borrower by Family or Friends. The Bank would require a letter from the Giftee that the funds are non-repayable.
Note: The letter could state repayable, but the Borrower would need to meet the borrowing capacity requirements for the gifted loan and the amount they want to borrow (in essence two loans).
If the letter states non-repayable, the funds will be treated by the Bank purely as a gift and will not affect the borrowing capacity.
Lower Deposit (Lenders Mortgage Insurance waived).
There are a number of Banks on our panel who will lend up to anywhere between 85% – 95% value of the property without Lenders Mortgage Insurance payable (conditions apply).
For example, Some Medical, Finance Professionals and Professional Athletes can borrow up to 90% value of the property and pay no Lenders Mortgage Insurance (check with us for the specific occupations who are eligible for this benefit).
Another example, we have a Bank that will allow all PAYG income (regardless of Occupation) earners to borrow up to 85% value of the property and pay no Lenders Mortgage Insurance (for Owner-Occupied purchases only).
Whiles everyone has completely unique and individual financial circumstances, we did find the above as a great summary of the various options, if you would like to find out more, or have particular questions, please either reach out to your team within Milestone or contact Gill directly on 61024333 or gillian@milestonefinancial.com.au.
Milestone Financial Services ABN 68 100 591 508 is an Authorised Representative and Credit Representative of AMP Financial Planning Pty Limited, Australian Financial Services Licensee and Australian Credit Licensee. This document contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information. The examples used are illustrative only and are not an estimate of the investment returns you will receive or fees and costs you will incur. If you decide to purchase or vary a financial product, your financial adviser, Milestone Financial Services Pty Ltd and other companies within the AMP Group may receive fees and other benefits. The fees will be a dollar amount and/ or a percentage of either the premium you pay or the value of your investment. Please contact us if you want more information on (02) 6102 4333.
