How to save a first home deposit in just over a year

 

It’s taking young couples roughly five years on average to save for a 20% home loan deposit, according to new research. Want to hear something crazy, though? We know how to quarter that timeframe…

Real talk: it’s never been tougher to save up a deposit for your first home.

In Sydney, the average timeframe is 8+ years. In Melbourne 6.5 years. And most other places across the country, 4 to 6 years. 

Unless you happen to know a finance professional who can help first home buyers purchase a home with just a 5% deposit – and not pay any lender’s mortgage insurance in the process.

And how do we do that?

If you’re eligible, we can hook you up with the First Home Guarantee (FHG) scheme – which will release 35,000 places from July 1 (more on this below).

By getting in early on this scheme and reserving a spot, you can quarter the time it takes you to save up for your first home deposit.

Don’t believe us. Check out these stats.

Below you’ll see how long it’s currently taking first home buyers across the country to save for a 20% home loan deposit (according to Domain data), compared to saving just 5%.

Sydney: 8 years 1 month (20%), down to 2 years (5%).
Melbourne: 6 years 6 months (20%), down to 1 year 7 months (5%).
Brisbane: 4 years 10 months (20%), down to 1 year 3 months (5%).
Adelaide: 4 years 7 months (20%), down to 1 year 2 months (5%).
Perth: 3 years 7 months (20%), down to 11 months (5%).
Hobart: 5 years 10 months (20%), down to 1 year 5 months (5%).
Darwin: 4 years 3 months (20%), down to 1 year (5%).
Canberra: 7 years 1 month (20%), down to 1 year 9 months (5%).
Combined capital cities: 5 years 8 months (20%), down to 1 year 5 months (5%).
Combined regionals: 3 years 10 months (20%), down to 11 months (5%).
Australia-wide: 4 years 5 months (20%), down to 1 year 1 month (5%).

So if you’ve been saving towards a 20% for at least a year, you could be ready to hit the ground running when the 35,000 FHG schemes become available on July 1.

Tell me more about the First Home Guarantee scheme!

Ok, so the First Home Guarantee scheme (previously the First Home Loan Deposit Scheme) allows eligible first home buyers to build or purchase a home with only a 5% deposit without forking out for lenders’ mortgage insurance (LMI).

This is because the federal government guarantees (to a participating lender) up to 15% of the property's value.

Not paying LMI can save buyers anywhere between $4,000 and $35,000, depending on the property price and deposit amount (it’s also worth noting that property price caps apply).

But places in this scheme are on a first-come, first-served basis.

So don’t let the recent expansion to 35,000 spots lull you into a sense of complacency.

They’ll go fairly quickly, which means if you’re interested, you’ll want to get in touch with us asap to ensure you’re ready to lodge the application come July 1.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether public or personal, nor is it intended to imply any recommendation or opinion about a financial product. It does not consider your individual situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

Budget winners: first home buyers, regional buyers, single parents

 

First home buyers, regional buyers and single parents keen to crack the property market are the big winners in this year’s federal budget – with 50,000 low deposits, no LMI scheme spots up for grabs. 

Want to buy your first home with just a 5% deposit and pay no lenders’ mortgage insurance? 

You could be in luck – the federal government is expanding its hugely popular First Home Guarantee scheme to 35,000 places from July 1, 2022.

First home buyers who use the First Home Guarantee scheme fast track their property purchases by 4 to 4.5 years because the scheme means they don’t have to save the standard 20% deposit.  

The government usually issues just 10,000 spots for the First Home Guarantee every July 1, but it’s upping the ante next financial year.

It’s worth noting that the similar New Home Guarantee scheme for first home buyers (10,000 spots for new builds only) isn’t expected to continue next financial year.

However, regional buyers (10,000 spots) and single parents (5,000 places) will benefit from similar schemes, which we’ll run in more detail below.

But first, what’s the First Home Guarantee scheme?

Ok, so the First Home Guarantee scheme (previously the First Home Loan Deposit Scheme) allows eligible first home buyers to build or purchase a home with only a 5% deposit without forking out for lenders’ mortgage insurance (LMI).

This is because the federal government guarantees (to a participating lender) up to 15% of the property's value.

Not paying LMI can save buyers anywhere between $4,000 and $35,000, depending on the property price and deposit.

But places in this scheme are on a first-come, first-served basis.

So don’t let the expansion to 35,000 spots lull you into a sense of complacency.

They’ll go fairly quickly, which means if you’re interested, you’ll want to get in touch with us asap to ensure you’re ready to hit the ground running come July 1.

The new Regional Home Guarantee

Regional homebuyers will benefit from the announcement of the Regional Home Guarantee.

Under the scheme, 10,000 guarantees each year (from October 1 2022, to June 30 2025) will be made available to support eligible regional homebuyers.

The good news is that this scheme will also be made available to non-first home buyers and permanent residents to purchase or construct a new home in regional areas.

Details on this scheme are still fairly limited, though. 

For example, it’s not confirmed in the budget papers or ministerial statements whether it will be a 5% deposit scheme like the first home buyer one.

And what’s classified as a “regional area” hasn’t been disclosed yet, but rest assured, we’re watching this space closely.

Family Home Guarantee for single parents

For single parents, 5,000 guarantees will be made available each year from July 1, expanding upon the Family Home Guarantee announced in last year’s budget.

The Family Home Guarantee can be used to build a new home or purchase an existing home with a deposit of as little as 2%, regardless of whether the single parent is a first home buyer or has owned property before.

Previously, it was planned that just 2,500 spots would be up for grabs over four years, so it’s good to see the federal government expand this scheme until June 2025.

Get in touch today to get the ball rolling.

With these schemes, allocations are generally snapped up fast.

So if you’re a first home buyer, regional buyer, or single parent looking to crack into the property market sooner rather than later, get in touch today. We can explain the schemes to you in more detail and help check if you’re eligible.

And when the spots do become available over the next few months, we’ll be ready to help you apply for finance through a participating lender.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether public or personal, nor is it intended to imply any recommendation or opinion about a financial product. It does not consider your individual situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

How much have car prices gone up since the pandemic began?

Most of you would have noticed that car prices have gone up significantly over the past two years. But how much have they gone up exactly? Let’s take a look.

You do not imagine things – both new and used vehicle prices have spiked over the past two years (not to mention house prices, petrol, groceries – everything, except wages).

Car price hikes include supply issues stemming from a semiconductor shortage, increased cost for raw materials, complications around shipping and parts procurement, factory shutdowns, and other pandemic problems.

But just how much have these disruptions sent car prices up? And what options are available if you need help financing your next purchase?

Let’s take a look.

New car price increases

The price of new cars has gone up as much as 25% since before the pandemic, according to an ABC article quoting website pricemycar.com.au.

A detailed analysis of 1100 models by goauto.com.au meanwhile calculates that as of March 2022, the average price of a new car has been up 7.6% since pre-pandemic times.

However, it varies from manufacturer to manufacturer and even model to model.

For example, some models such as the Toyota Yaris have gone up by 37% ($7290 extra).

Here’s how much some of the more prestigious manufacturing brands have increased prices:

Land Rover: 9.01%, Audi: 8.59%, BMW: 8.42%, Jaguar: 5.33%, Lexus: 3.36%.

And here’s how much some of the more mainstream manufacturers have increased prices:

Volkswagen: 9.83%, Hyundai: 9.06%, Jeep: 8.91%, Nissan: 8.59%, Toyota: 7.70%, Fiat: 7.21%, Mitsubishi: 6.80%, Renault: 6.60%, Subaru: 6.00%, Citroen: 5.93%, Mazda: 5.30%, Ford: 2.73%.

Used cars

Because of the wait times for new cars (due to supply constraints), used car prices have gone up even more.

Used cars have risen 50%, Datium Insight’s price index in this ABC article shows.

Meanwhile, car valuation expert Redbook.com.au estimates a 25 to 35% increase in recent years.

How to finance your next purchase

Been wondering about how your neighbour bought that fancy new car?

There’s a better than even chance they took out finance to purchase it, with Mozo research showing that 52% of car buyers took out a loan to buy a vehicle in the past decade, for an average loan size of $25,000.⁣⁣⁣

And when it comes to timeframes to pay that loan back, while most car loan providers offer a maximum term of up to 7 years, the average loan is usually repaid in the 2-3 year range.

It’s also worth mentioning that if you’re purchasing the vehicle for your business, the federal government’s temporary full expensing scheme can help your business’s cash flow ahead of the financial year deadline of June 30.

So if you’d like to find out more about financing your next vehicle purchase – whether it be for your household or business – get in touch with us today.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether public or personal, nor is it intended to imply any recommendation or opinion about a financial product. It does not consider your individual situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

16 ways the government should tackle housing affordability: report

Think property prices have gone a little bonkers? You’re not the only one. A report with 16 recommendations to tackle housing affordability has just been plonked on pollies’ desks in Canberra. Today we’ll run through them for you (succinctly, we promise).

You might have noticed that property prices have skyrocketed over the past 18 months, to the point where many first home buyers are now having real difficulties cracking the market.

So how is the Government looking at addressing it?

A House of Representatives committee (made up of both Liberal and Labor MPs) tabled a report titled ‘The Australian Dream’ in federal parliament last week outlining 16 ways to improve housing affordability and supply across the country. 

Below, we’ve summed up all 16 recommendations, starting with a few of the report’s more eye-catching proposals.

Replace stamp duty with land tax

The committee recommends that states and territories replace stamp duty with land tax.

This should be implemented over time so that those who have already paid stamp duty or recently paid it don’t face double taxation. 

The committee says this change would increase housing turnover, remove an unnecessary obstacle to homeownership, and stabilise government revenues.

In the meantime, a transition review is recommended, and states and territories should adjust stamp duty brackets to redress decades of stamp duty bracket creep.

First home buyers to use their super as security for home loans

The committee says that the Australian Government should allow first home buyers to use their superannuation as security for home loans.

“Allow first home buyers to use their superannuation balance as collateral for a home, without using the funds themselves as a deposit, thereby expanding the opportunity for home buyers,” the committee says.

“This recommendation will therefore remove the largest barrier for home buyers; being the deposit.”

However, the committee warns this recommendation should only be implemented in conjunction with some of the other proposals on this list that increase housing supply.

“Otherwise, an increase in households’ ability to borrow would likely increase property prices,” they add.

Rent-to-own affordable housing

The Australian Government should encourage private sector partnerships to deliver rent-to-own or discount-to-market affordable housing. 

“This will diversify the housing market and provide affordable housing options for low to medium-income earners, people experiencing homelessness, women escaping domestic violence, parents and children,” the report states.

The committee’s other recommendations

Increase urban density in appropriate locations: specifically areas well-serviced by under-used transport infrastructure. 

Incentivise planning and property administration policies: provide incentive payments to state and local governments to encourage better planning and property administration.

Pay states and localities to deliver more affordable housing: grants could be in the form of cash or infrastructure.

Adopt recommendations from the Inquiry into homelessness.

Increase the supply of critical housing such as crisis housing.

Don’t mess with negative gearing: the committee recommends the Australian Government not change its current negative gearing policy. 

Reform developer contributions: work with state and territory governments to reform developer contributions so value-adding and in-demand infrastructure is delivered. 

Review the build-to-rent housing market, particularly how it’s affected by current regulations and tax policies. 

APRA to continue monitoring lending standards.

No changes to the RBA’s charter: ensuring that house prices are not a specific objective of monetary policy. 

Up-to-date forecast data: implement ways to get more up-to-date forecast data on population, housing approval and completions. 

Unlock new housing supply: concessional loans to infrastructure projects and community housing providers that will unlock new housing, particularly affordable housing.

Final word

Here’s the most important thing, though. You don’t have to wait for the Government to get the ball rolling on the above recommendations to help you crack the property market.

Most states offer grants and stamp duty concessions/exemptions for first home buyers to help give you a leg up.

Several federal government options back up for grabs from July 1, including the popular First Home Loan Deposit Scheme and New Home Guarantee initiatives, which enable first home buyers to make their home purchase four to 4.5 years sooner on average.

That’s right – four years sooner!

So if you’d like to find out about ways to overcome housing affordability issues, get in touch today – we’d love to help you come up with a plan.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether public or personal, nor is it intended to imply any recommendation or opinion about a financial product. It does not consider your individual situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

What’s your debt-to-income ratio? And why do lenders care about it?

New data from the lending watchdog reveals almost one in four new mortgages are risky.

 How are they deemed risky? Well, it’s got something to do with your debt-to-income ratio,

 which we’ll explain in this week’s article.

Your debt-to-income (DTI) ratio might sound complicated, but it’s really very simple to work out.

Basically, your DTI is a measurement used by lenders that compares your total debt to your gross household income.

The formula is: total debt / gross income = debt-to-income ratio.

So if you’re seeking a $700,000 home loan (and have no other debt), and you have $160,000 in gross household income, your DTI is 4.375 – a ratio most lenders would be very comfortable with.

So why do lenders care about your DTI?

Well, December quarter data just released by the Australian Prudential Regulation Authority (APRA) shows 24.4% of new mortgages have a DTI ratio of 6 or higher.

At the 6+ ratio, APRA (aka the banking watchdog) deems these loans as risky.

And they’re keen to see the percentage of these loans that lenders approve start to come down.

That’s because they’ve been steadily on the rise for a while now.

In the September 2021 quarter, for example, new mortgages with a DTI of 6 or higher were at 23.8%, while in the December 2020 quarter it was at just 17.3%.

“However, the rate of growth in the [most recent] quarter slowed,” APRA points out (probably with a sigh of relief) in their latest release.

So why has the percentage of risky loans recently risen?

The recent rise in high DTIs has most likely got a lot to do with the phenomenal price growth (and resulting FOMO!) we’ve seen across the country over the past 12-18 months.

In fact, new data released by the Australian Bureau of Statistics shows that in the 12 months to December 2021, residential property prices rose 23.7% – the strongest annual growth ever recorded.

The mean price of residential dwellings in Australia now stands at $920,100.

That’s a jump of $44,000 from the September quarter ($876,100), and a jump of $176,000 in 12 months from the December 2020 quarter ($744,000).

So with property prices increasing at such a sharp rate, and people stretching themselves to their limits to buy into the market, it has resulted in upwards pressure on high DTI percentages.

The good news is that as the property market starts to cool, so too should the growth rate of risky DTIs, which is what APRA alluded to above.

So how much can you safely afford to borrow?

There’s a fine line between maximising your investment opportunities and stretching yourself beyond your limits.

Especially so as RBA Governor Dr Philip Lowe this week warned Australians to start preparing for higher interest rates.

And that’s where we come in.

It’s not only important to stress-test what you can borrow in the current financial landscape, but also against any upcoming headwinds that are tipped to hit borrowers – such as interest rate rises and possible tightening lending standards.

But hey! Everyone’s financial situation is different. Some lenders will take into account your particular circumstances and accept a loan application where a DTI is higher than 6.

So if you’d like to find out your borrowing capacity and options, get in touch today. We’d love to sit down with you and help you map out a plan.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

Which two capital cities might have just hit their property price peak?

 

It's a three-speed property market across the country right now, with two capital cities showing signs prices might've peaked, three cities looking like they could soon peak, and three still going strong. How is the market performing in your neck of the woods?

According to the latest CoreLogic figures, while national housing prices have increased a staggering 20.6% over the past 12 months, every capital city and broad 'rest-of-state' region is now recording a slowing trend in value growth.

However, some areas are faring better than others, as we'll run you through below.

Possibly peaked: Sydney and Melbourne.

Sydney and Melbourne showed the sharpest slowdown in February, with Sydney (-0.1%) posting its first decline in housing values in 17 months (since September 2020), while Melbourne's housing values (0.0%) were unchanged over the month.

That's a pretty big drop off for Sydney in particular, which recorded 0.6% growth in January, while Melbourne recorded 0.2%.

A major contributing factor to this slowdown is now more property stock for buyers to choose from.

In Melbourne, advertised stock levels are now above average and tracking 5.5% higher than a year ago, while in Sydney, the advertised stock is 6.3% higher than last year.

CoreLogic's director of research Tim Lawless says more choice translates to less urgency for buyers and some empowerment at the negotiation table.

"The cities where housing values are rising more rapidly continue to show a clear lack of available properties to purchase," Mr Lawless explains.

It is potentially peaking soon: Perth, Canberra and Darwin.

The three capital cities that showed signs of slowing down in February – but not yet peaking – are Perth (0.3%), Canberra (0.4%) and Darwin (0.4%).

To put those figures into context, in January, Perth (0.6%), Canberra (1.7%) and Darwin (0.5%) all recorded higher housing growth figures.

And over the past 12 months, Perth (8.3%), Canberra (23.8%) and Darwin (12.3%) have all performed quite strongly.

It is still going strong: regional areas, Brisbane, Adelaide and Hobart.

Conditions are easing less noticeably across Brisbane (1.8%), Adelaide (1.5%) and Hobart (1.2%).

Similarly, regional markets have been somewhat insulated from slowing growth conditions, with five of the six rest-of-state regions continuing to record monthly gains of over 1.2%.

The stronger housing market conditions in Brisbane and Adelaide, in particular, can be seen in the quarterly growth figures, with Brisbane housing values rising 7.2% over the past three months and Adelaide up 6.4% over the same period.

So while Brisbane and Adelaide have slowed down a touch, a shortage of listings in those markets is helping to keep pushing prices up.

"Total listings across Brisbane and Adelaide remain more than 20% lower than a year ago and more than 40% below the previous five-year average," explains Mr Lawless.

"Similarly, the combined rest-of-state markets continue to see low advertised supply, 24.9% below last year and almost 45% below the five-year average."

Need help to finance your 2022 home purchase?

With property prices slowing down around the nation, now's a good time to take stock and work out what you can and can't afford over the year ahead – be that buying your first home or adding to your investment portfolio.

And part of that process is finding out your borrowing capacity before you start house hunting, so you don't stretch yourself beyond your limits.

So if you'd like to find out what you can borrow – and therefore afford to buy – get in touch today.

We'd love to sit down with you and help you map out a plan for your 2022 finance and property goals.

Disclaimer: The content of this article is general and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether public or personal, nor is it intended to imply any recommendation or opinion about a financial product. It does not consider your situation and may not be relevant to circumstances. Before taking any action, consider your particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.