Eligible first homebuyers will miss out on the leg-up provided by the full First Home Owner Boost (FHOB) if they fail to enter into a purchase contract and receive finance approval before 30 September 2009.
With interest rates almost certainly as low as they will go for another few years and extra money on offer from federal and state governments to purchase a first home, now could be a great time to stop paying your landlord’s mortgage and start paying your own.
The key to your new home is to plan early.
Senior corporate affairs manager for Mortgage Choice, Australia’s largest independently-owned mortgage broker, Kristy Sheppard said, “With the deadline for the full First Home Owner Boost approaching at the end of this month, there is a sense of urgency among many potential first homebuyers, which means lots of keen competition for the same types of properties and within the mortgage market.
“For this reason, keep in mind it may take up to four weeks to gain loan approval, depending on the chosen lender.”
“It is important first timers understand the importance of planning ahead in order to reach their goal of home ownership, especially those aiming to purchase before the boost expires completely on 31 December 2009.”
First time buyers need to also overcome tougher lending restrictions. For some time now lenders have been tightening up on borrowing policy, especially for loan amounts above 90% of the purchase price. For example, many now require borrowers to contribute at least 5-10% of the property purchase price towards their deposit in the form of genuine savings accumulated over a period of at least three months. This excludes any government incentives or grants, such as the FHOB.
“As tempting as the offers may be, first time buyers shouldn’t let extra incentives sway them if they aren’t sure about a property, or their ability to make loan repayments and meet associated property ownership costs, particularly as interest rates are set to rise. The key is to start preparations well in advance so that they are better equipped to take advantage of opportunities as they arise,” said Ms Sheppard.
Purchasing a first home is often the biggest financial commitment many Australians will make.
For this reason buyers need to ensure they have adequate savings to meet current lending criteria and additional costs including but not limited to, lenders mortgage insurance (LMI), conveyancing/solicitor fees, property/pest inspections, loan application fee, property transfer fee, mortgage registration fee, property stamp duty, council rates, water and electricity bills plus living expenses.
“Due to the rising cost of home ownership, there has been a noticeable drop in the number of first time buyers purchasing alone. The Mortgage Choice 2009 First Homebuyer Survey revealed 72% of people planning to purchase their first home this year were doing so with a partner (64%), family member (5%) or friend (1%),” Ms Sheppard said.
“Sharing the responsibility is a great way to get ahead assuming all parties are committed to the purchase, able to meet repayment levels and have a solid agreement in place should one party decide to opt out of the deal.
“First time borrowers shouldn’t feel as though they have to do it on their own even if they are purchasing solo. Reputable brokers such as Mortgage Choice don’t charge customers for their residential loan services, such as helping first homebuyers search for a suitable home loan. They are also happy to check and submit the First Home Owner Boost application on the borrowers’ behalf.
“There really is help at hand for those who feel rushed and need a guiding hand through the mortgage maze. Brokers can assist by showing practical tips for meeting the genuine savings criteria, helping maximise their borrowing capacity and putting in place a plan to meet lenders’ requirements so borrowers can take advantage of first home owner incentives.”
First homebuyers who sign a contract to purchase or a contract to build before 30 September 2009 may be eligible for the grant boost totalling $14,000 for established homes or $21,000 for newly constructed homes, in addition to state or territory based incentives available in the purchase location.
From 1 October 2009 until its expiry on 31 December 2009, the FHOB will be halved. During this period, first homebuyers may be eligible for $10,500 for established homes or $14,000 for newly constructed homes, in addition to any state/territory-based incentives.
On 1 January 2010, the FHOB will no longer exist and first homebuyers will be eligible to receive only the original $7,000 national First Home Owner Grant plus any state/territory-based incentives.
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