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Who is eligible for expanded first home deposit scheme?
200 Plays15 days ago
The $1.5M Home on a 5% Deposit? Everything’s Changing October 1st
Massive changes are hitting the First Home Guarantee Scheme — no more income caps, unlimited spots, and new price thresholds that actually reflect the market. Find out how these updates could fast-track your home ownership journey by years, save you tens of thousands in LMI, and finally put real homes in reach for everyday Australians. Plus, the risks, realities, and how to get financially ready before the doors open.
Stop guessing about your buying power! Get a FREE personalised home buying assessment with Hunter Galloway. Call 1300 088 065 or visit huntergalloway.com.au
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Transcript
Introduction to the Podcast
00:00:00
Speaker
Right now, the property market looks cooked. And you're probably thinking it's nearly impossible to save up a 20% deposit that you're gonna be renting forever. But all that's just changed. The Australian government has just made a move that's going to crack the housing market wide open for an entire generation.
00:00:15
Speaker
And it's going to happen on October 1st this year. Welcome to the Buying Your First Home podcast, your personal guide through the Australian housing market. Here we tackle the big questions and the small details that come up when buying your first home. From financial prep to finding the right neighbourhood, we're here to ensure that you've got all the knowledge at your fingertips. So let's take the first step towards unlocking the door to your new home.
Changes to the First Home Guarantee Scheme
00:00:43
Speaker
The first home guarantee scheme got the biggest overhaul in Australian history. It is massive. There are three changes that going completely rewrite the rules. The first, the income cap is gone.
00:00:54
Speaker
Scrap. That means anyone earning over the limit, previously there was $200,000 for couples, any doctors, lawyers, engineers, even if you've single bonus, you might pulled out first home super saver. Doesn't matter, you're back in the game.
00:01:05
Speaker
Second, there's unlimited places. Now, I know you would on TikTok last year, you're going miss out, there's only $25,000 places, all that sort of stuff. Well, Now, as long as you qualify, you're in. There's unlimited spots. Third, there's price gaps that actually made sense.
00:01:17
Speaker
Sydney's price gap jumps from 900,000 to 1.5 million. Brisbane rockets up from 700,000 to 1 million. And Melbourne goes from 800 to 950. This finally puts a real home within reach. I'm talking a place with a backyard in a decent suburb with good schools, not a one bedroom apartment three hours from your work.
00:01:33
Speaker
right, so let me put this in perspective with real numbers that are just going to be surprising. Without the first home guarantee scheme, you'd need a massive $300,000 for deposit a billion dollars home say in Sydney. savings.
00:01:46
Speaker
for most couples that's fifteen years of just relentless saving And then if you didn't get to the 20% deposit, well, as you probably know, you're going to get slapped with lender's mortgage insurance. So in that same home, you're going to pay a $40,000 or $50,000 fee to the bank to cover them and not you.
00:02:00
Speaker
But with the updates to the scheme, you only need a 5% deposit. $75,000 on million dollars home. that's just seventy five thousand dollars on a one point five million dollars home and you're paying zero in LMI.
Impact of the Scheme on Home Buyers
00:02:12
Speaker
That money stays in your pocket for the future. gives you extra equity. You can use a furniture, for renovations, for a car, or just have less loan. So let's look at the money you'd save city by city.
00:02:23
Speaker
In Brisbane, on a million dollar home, you'd save around $25,000 lender's mortgage insurance. in Perth, on an property, about and in melbourne on a nine hundred and fifty thousand dollars home you're putting twenty five thousand in your back pocket It's crazy. like That's not a small amount of money. It's life-changing. It can help you get years ahead in terms of your financial goals.
00:02:42
Speaker
The market reality. Look, I'm going to go through warts and all on this scheme because if I didn't, and to talk about the rosy times, I'm not doing my job properly. The reality is the Australian market at the moment, for lack of a better word, is pretty cooked.
00:02:54
Speaker
Just look at the numbers. The national median dwelling price is sitting at 844,000. And if you're in a major capital city, the growth has just been relentless. Last year alone, Perth houses skyrocketed by 17%. Brisbane jumped more than 11%.
00:03:08
Speaker
And in Sydney, the average house is a staggering $1.5 million, dollars with prices rising 4% over the last four months. And here's the crux the problem. Last year, we added 445 new people to Australia, but we only completed 177,000 new homes.
00:03:22
Speaker
We're literally adding twice as many people as homes. And anyone that understands basic economics knows what happens
The Housing Crisis in Australia
00:03:29
Speaker
next. When demand massively outstrips supply, prices tend to go up. And if you're not in the market, you're going to fill it on the other side too.
00:03:35
Speaker
The national rental vacancy rate is at a terrifying 1.2%. A healthy market should be almost twice that, at 3%. So this isn't a tight market. We're in full-blown housing crisis, which obviously was talked about a lot last year.
00:03:46
Speaker
So the question i've been asked a lot lately is will this first home guarantee scheme actually fix the housing crisis? But before I go into my opinion, let's talk about the experts. They're all pretty divided on it. On one hand, the property and banking industries agree that it's a great solution.
00:03:59
Speaker
They say the biggest hurdle for first home buyers isn't making the mortgage repayments. It's saving that staggering 20% deposit, which can take a decade. They're saying the scheme is a genuine game changer. It's going to slash tens of thousands of dollars you're going to need in deposits that and help you get a home years faster than you otherwise would have.
00:04:14
Speaker
Sounds amazing, right? Well, a lot of Australia's independent experts are waving some pretty big red flags. Take veteran economist Sol Eastlake. He says he's seen this movie over decades of Australian housing policy.
00:04:25
Speaker
He argues the issue with these schemes is they don't create a single new home. All these schemes do is give thousands more people the ability to borrow more money to fight over the exact same limited number of houses.
00:04:35
Speaker
And we have more buyers armed with more money from the bank, all bidding on the same property. Well, the price doesn't really go down. The opposite. Looking at previous schemes, it actually goes up. So this policy that's designed to help could actually make it more expensive for everyone in the long run.
00:04:49
Speaker
Let me show you what this really means for a couple in, say, Brisbane.
Pros and Cons of the Scheme
00:04:52
Speaker
Meet Sarah and James. She's a senior teacher and he runs his own plumbing business. Together they earn $180,000 and they're ready to start a family. Under the old rules, the price cap in Brisbane was $700,000.
00:05:01
Speaker
For that price, Sarah and James were fairly stuck. Their dream of a family home with a backyard was just not realistic in the current market. So they're looking at two bedroom units or a pretty huge commute. It was just a constant compromise.
00:05:12
Speaker
Fast forward to the 1st of October this year with the new million dollar cap, it changes their entire future. Suddenly they can look at homes they want in areas they would like to live. They could easily find a three bedroom house in Brisbane for under $950,000.
00:05:24
Speaker
Under the old 20% model, they're going to need a staggering $190,000 to make that work. Under a new scheme, their 5% deposit is only $47,500. That's $142,000 difference, allowing them to buy the right home in the right suburb years earlier.
00:05:40
Speaker
In their situation, it's not just a financial win. They get to bring their first baby into a home with a backyard, and they can live in a home in the area they want. In their case, it's not going to be a financial win, but it allows them to bring their first baby into a house in the backyard,
00:05:51
Speaker
They get to live without those compromises of being further away or further from work. And that's where this change really delivers. But where it will get tricky is all those places are currently selling, say, or capped up to that $700,000 and potentially get their prices pushed up to the new million dollar cap.
00:06:03
Speaker
Now, this scheme isn't all roses and chocolates. There are some risks if you are thinking about getting the home guarantee scheme, especially in the case where you might have a bigger deposit. and You might think, well, just going to put in a little bit less. I'll keep some extra money, that sort of thing. The first biggest risk of this scheme is the high leverage.
00:06:17
Speaker
Borrowing 95% means you're starting with pretty much no real equity. I mean, there's the 5% there, but if the market drops by 5% or 10%, it means you could lose your equity overnight.
00:06:27
Speaker
That could mean that you owe the bank more than your home's actually worth. And you can't sell at that point or you can't refinance. You're trapped in what the industry calls mortgage prison. And it's a real situation. if you're going to stay in the place for the next 5-10 years and if you look at the market historically, on average over the 30 years, the Australian property market's gone up about 5-6% per year. It's pretty insane. so If you look at that, looking over the next 5-10 years, you're fine. But if you're trying to get in and out of the property in a year, then this is something you really need to consider.
00:06:53
Speaker
The second thing you need to think about is interest rate shock. You're taking on the biggest loan in your life at a time when rates are unpredictable. The RBA is not looking out for your personal budget. So if they hike the rates, your repayments are to up. and it's worth thinking about this. Could your budget really handle your repayments jumping another 50, 100?
00:07:08
Speaker
What about 500? That's what happened during COVID. You need to test your own lifestyle and make sure that you've got that little buffer or fat built in. Now, I'm not trying to tell you this to scare but like this is the reality. This is stuff that people don't talk about.
00:07:19
Speaker
And it's important to go into these schemes with your eyes wide open, understanding what the situation is. The third thing to be aware of is the scheme only applies for as long as you' living in the property. So if, for example, you plan on living in the property for a year, then you move out after a year and you turn to investment, then technically you're not eligible for the scheme anymore. And the bank can ask you to refinance to remove that scheme spot.
00:07:39
Speaker
It happened to a client this week where she moved out, changed her address in the bank system and the bank said, whoa, hold on a minute. You're not living there. You aren't allowed to have that government scheme anymore. You need to refinance and she's potentially up to pay lender's mortgage insurance.
00:07:52
Speaker
So keep that in mind. With the home guarantee scheme, it's not a case of living there for 12 months and you can move out. No, to be eligible and to keep that government guarantee scheme in place, you have to keep living in the property. Alright, that's enough fear factor, that sort of stuff. Like I said, it's just good being aware of what's important and what's happening.
Applying for the Scheme: Tips and Steps
00:08:07
Speaker
But what do you do from now? How do you get prepared for October 1st? How do you get all your ducks in a row and get ready to apply for that scheme? Step one is your bank statements. Now, the banks aren't as bad as they used to be. They're not going to go through your Uber Eats within reason. They're not going to worry if you had a wedding or some big want expenses.
00:08:21
Speaker
But... if there's any gambling, um if you've got any direct debits for afterpay, that sort of stuff. It is worth tidying things up just because the banks will generally want your last three-month statements just to confirm your salary, credits, and look at base living expenses.
00:08:34
Speaker
This is even a good time to chat to a broker. Usually what we'll do is we'll sit down, get copies of your statements, and have a look at it and say yep, Jayden, your statements look fine. All right, I can understand you had a European holiday in July. The bank's going be fine with that. We've got your savings, we've got your history, et etc, e etc.
00:08:47
Speaker
Or we might say, well, you you've got a credit card, you've got a $10,000 limit, that's reducing capacity. Maybe need to look at cutting that to $5,000 and get everything prepared. Step two is knowing your real costs. Now, as I mentioned, this scheme allows you to buy with a 5% deposit.
00:08:59
Speaker
But on top of that, you need to cover the stamp duty, solicitor fees, and other government fees. so in a lot of states you can double this down in brisbane for example if you bought a place under 700 000 the stamp duty is completely waived so then you're buying place for around 700 000 you just need your 35 000 5 deposit plus another 5 000 or so in cost about 40 grand but if you buy a place for 800 000 you need the five percent deposit plus stamp duty so factor in another two to three percent of costs just to cover the purchase price statute and everything else to make sure you're going to have enough there to buy step three is having your paperwork perfect
00:09:32
Speaker
Well, usually when we do the application, we need your payslips and everything to be within the last month. So if you're not thinking about applying till January, there's no point collating your payslips and everything at this point. But if you're self-employed, the banks will need your most recent years tax return. So it's worth looking at that, getting everything finalized and even lodging your tax return to get your refunds and everything back so you're ready to go.
00:09:50
Speaker
Step four is a fully assessed pre-approval. In the current market where things are moving at a really fast pace, a pre-approval is important because it means you can move quickly, you know your budget, and you know that instead of it taking, say, 14 days, two weeks, you learn approval, we can actually get it done much quicker.
00:10:05
Speaker
So if you are considering making offers in the next three months, a pre-approval is definitely the way. At Hunter Galloway, we could help you out. We help homebuyers all across Australia. So if you are looking at a pre-approval, hit us up. Step five, and I think most importantly, finance stuff aside, is becoming a market expert.
00:10:19
Speaker
So even if you're in the early stages of buying and you're trying to work out what the budget should be, have a look on real estate or domain. Look at the sold section. Look in the suburbs you like. i probably those sold in the last one to two months and try and get a sense of the budget you're going to have pay. If you've been looking at places that sold two years ago, you're obviously going to not be across the current market conditions.
00:10:36
Speaker
So this can help just giving you an understanding of, well, for $800,000, I'm going to get a three bedroom, with this sort of backyard, or if we go further away, this is what we can get. Listen, after doing this for almost 15 years and helping thousands of people into their home, I've learned there's one thing that really slows people down.
00:10:51
Speaker
The biggest barrier to owning home isn't having enough deposit. It's not your job. It's just the belief that you can't do it. I see it every week. Last week, I spoke to a nurse who didn't realize her rent was the same as what her mortgage repayments would be if she bought her own home.
00:11:03
Speaker
There's a chippy I spoke to last month that didn't know he could start making contributions his first super saver scheme to help him save a deposit a lot quicker. For both of them, they thought they were five to six years away from buying a home when the reality is it's probably six to 12 months.
00:11:16
Speaker
So stop wondering what you're potentially eligible for or what's possible and find out today. At Hunter Galloway, we're the home for homebuyers across Australia. We can give you a free assessment to work out what's possible now, where you need to be, and when you can potentially buy a home.
00:11:30
Speaker
We help homebuyers all across Australia getting into the home guarantee scheme, looking guarantor loans your parents, and other ways of getting into the market. So if you're wondering, is it possible? Can I do it? Well, hit us up and we'll find out and stop that wondering.
00:11:43
Speaker
Just go to huntergalloway.com.au, fill out the form there, and we'd love to help. Until next time, we'll see you later.