5% Deposit for FHBs

What about someone who can afford a 20% deposit, but elect to take advantage of this scheme and use the 15% for investment that gives a higher return than the interest rate? Would it be a sensible strategy?

 

I'd imagine you would have same qualifying rules as FHOG - though you could probably live in it for x amount of time, then rent it out....

 

I think its a lot more likely that FHB will use the opportunity to buy in a more prestigious area and those that keep the extra $ in their pocket will spend it on cosmetic reno’s. Which isn’t necessarily a bad thing.

 

How do you figure that?
The Government is footing the bill which we are paying for anyway.

If that were the case then just tax us less and let me spend it.

 

That was in response to "home buyers would spend more rather than save"

 

Yeah I get that but my point is they would spend more because the Government is going to pay the LMI premium.

Instead of the government paying the LMI for all these people, how about don’t introduce the scheme, tax me less and let me spend it to stimulate the economy

 

The problem with paying the LMI premium is they're still borrowing 95%. Not many lenders offer anything decent at 95% LVR, these borrowers can expect to pay above 5% instead of below 4% with an 80% loan.

I reckon our previously proposed guarantor scenario would cost the government less and give a better deal to the borrower.

 

Surely the government won't actually pay LMI premiums to a private insurer, that would be a bit of a rort. But it sounds like they will be acting as a mortgage insurer. Still plenty of good rates in the 80-90% LVR range at least.

As I understand it, first home buyers have a below average default rate and are relatively low risk. So I expect an unintended consequence of this policy will be to take lower risk borrowers out of the private sector LMI market. Leaving a higher risk pool of borrowers, which wil push up LMI premiums for everybody else.

 

I think they do have a lower risk , but would the risk stay the same if they only stumped up 5% and the taxpayers stumped up the rest.

 

Is this still funny? If so, we aren’t at the bottom yet

 

My understanding is that no money will be paid. The government will simply guarantee the loan shortfall in case of default. That is why the qualifying bar has been set quite high regarding employment and income.
Marg

 

Probably in general true. But looking at ones income only accounts for half the story. My family could be earning over 200k right now, but I would have to have 3 kids in child care which would cost me over 60k a year (after subsidies)

 

Understand that but having kids is your choice, same as having oversea holiday, owning a house, etc. There is nothing wrong with having kids (actually it is a really good thing), and/or having a comfortable/enjoyable lifestyle but at the end of the day one needs to balance what they want to have and what they can have. They cannot expect the government/tax payers to help unless they have unique situations (disability, etc.) which prevent them to advance in life. For me, property ownership is a privilege, not a right.

 

It’s actually the traditional Australian dream.

Most Australians think property ownership should be kept within reach of the average wage earner.

Go to China if you want it to be a privilege

 

The point in your original comment was about people reviewing their spending habit. My comment was addressing that. Don't respond to me by making a completely separate point.

The question of whether property ownership being a privilege or right really has nothing to do with how much a person earns or their spending habits, but how you believe society should be structured.

 

If it is a dream, they should prepare to sacrifice to get it. Should not expect someone to help them. As I said, the scheme is probably good but the income cap need to be lower.

 

My post is not a personal attack so take it easy mate. I know your post is to say that income is just one side of the story and I agree with that. My response is to say that having kids and the need to pay childcare can also be managed as part of your spending habit. I know a lot of people who only earns less than 2/3 of $200k with kids and still managed to save and then bought their house (and IPs).

 

The LMI insurers will do a hatchet job on the banks so it works adversely to the intended effect. You think Genworth etc want to see a huge % of their business be taken by Govt ?

All insurance works on pooled risk. If the Govt adopts a scheme to carve out the gold plated OO borrowers it leaves higher risk with the LMI insurers. Up go premiums.

One issue not touched on by media is that LMI insurers will pursue the borrower in default. The Govt policy appears to be a guarantee and the buyer can walk away with no issue ?? That could encourage reckless credit and predatory selling of property that is swampland marketed to first home buyers.

 

It’s not about help, it’s about appropriate distribution of govt resources.

 

So the government is guaranteeing debt given by banks to first home buyers. What could possibly go wrong........