5% Deposit for First Home Buyer Scheme vs Interest Only Offset

Discussion in 'Loans & Mortgage Brokers' started by Curious Johnny, 8th Feb, 2020.

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  1. Curious Johnny

    Curious Johnny Member

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    Good morning.

    My question was centred around the governments 5% deposit home loans for first home buyers. I am looking to take make my first purchase for a PPOR and my plan is to invest in real estate inside the next 3 years after making the initial purchase, and then beyond that.

    My question is, would the benefits of an Interest Only Loan with an Offset account, with roughly a 15% deposit, having to pay LMI, outweigh the short term benefit of paying no LMI and having a P&I loan under this scheme ?

    Any points would be appreciated.
     
  2. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker Business Member

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    Generally IO not available for main residence loans
     
  3. Morgs

    Morgs Well-Known Member Business Member

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    Especially if >80% LVR - the few lenders that have IO OO appetite won't like that.

    Are you planning on turning the purchase into an investment in future?

    What will be the limiting factor in 3 years in buying the next investment property? Deposit (which is preserved buying the first property with 5%) or borrowing capacity?
     
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  4. Archaon

    Archaon Well-Known Member

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    Have an offset account on the PPOR, put the 15% in there and save the interest.
    Pay down your principal and split the equity off into a new split to use as a deposit for a new property?
    @Terry_w has anyone seen these FHLDS loans, if you have a 95% loan, can you pay down 15% and redraw it, or is redraw locked until after 80% LVR?
     
  5. Richard Taylor

    Richard Taylor Well-Known Member

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    Yes had a dozen or so approved and working thru the contracts prior to completion.

    As long as your chosen lender offers a redraw facility on the product there is no issue in paying down the loan and redrawing it.

    Cheers


    Richard
     
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  6. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    the rate spread on IO to PI at that LVR is a bit big with the few lenders that offer IO on PPOR lends, though there are one or 2 exceptions as always

    2 Core qs to the outcome of your goals may result in a different strategy

    1. Are you looking at an active debt recycling strategy ?
    2. What is the fate of the property you will buy, Long term B&H OO, flick to upgrade, or hold as IP while upgrading ?

    ta
    rolf