From July 1 2017, Victorian eligible first home buyers in will no longer pay any stamp duty when they purchase new or existing properties under $600,000. Properties between $600,000 and $750,000 in Victoria will receive stamp duty concessions.
This means first home buyers can save an average of $8,000*. This is in addition to the $10,000 First Home Owner Grant (FHOG) you may be eligible for when you buy or build your first new home valued at under $750,000.
These changes affect many young Australians who are striving to break into Melbourne’s competitive housing market. Recent ABS data suggests first home buyers entering the property market are at record lows (13%). Get smart.
Many parents and young hopeful buyers don’t realise that they can often qualify for a home loan sooner with the help of a family pledge/guarantor loan or a gifted deposit.
It is a great time to consider these options. Parents providing a gifted deposit or offering a family pledge, coupled with the First Home Buyers Grant and savings on stamp duty, can position first home buyers very well to purchase their first home, sooner rather than later.
How a gifted deposit works:
Parents with enough equity in their home can apply to refinance and borrow funds which they can then gift to their children as a home loan deposit.
Some key points:
- Lending criteria applies to the parents as borrowers
- First home buyers who are receiving a gifted deposit will need to apply for their own home loans and be solely responsible for repaying their debt
- Parents who are gifting the deposit are required to state in writing that the money is in fact a gift and they do not expect the money to be repaid
- Lenders require the gifted funds to be sitting in an account untouched for a period of time
- First home buyers needs to indicate a reasonable income and credit score to assess affordability
This is a great option for aspiring first home buyers struggling to save a deposit due to high rental costs.
A preferred option in many cases is the family pledge or guarantor loan.
How a family pledge/guarantor loan works:
This option allows family members (usually parents) who have a property with enough equity to gift or share this equity. This removes the need for the additional deposit and removes the need for genuine savings. In many cases, this approach can also remove the need for lenders mortgage insurance (LMI) which can be costly. All this without parents having to borrow more or provide cash as an upfront deposit.
Some key points:
- A guarantor loan uses a parent’s home as a limited guarantee for equity only
- Parents are not required to service the loan or make any payments
- The children / family members (borrowers) are responsible for servicing the loan
- The children / family members (borrowers) need to meet eligibility criteria for the full loan amount
The required equity for this type of loan varies between lenders. WhiteStar Mortgage Brokers can help both parents and children identify options so everyone understands what choices are available.
Many borrowers are unaware that these options exist. If you’re hoping to buy your first home and take advantage of the stamp duty savings from July 1 you should really consider these steps:
- Call us to talk about your financial position on 1300 652 842
- Chat to your parents about their equity or have them call us on 1300 652 842
- Email email@example.com and write to us about how soon you would like to buy your first home, we’ll work hard to help you get there