Given the prospects of interest rates rising, bite what you can chew!
First-home buyers with small deposits risk negative equity.
Consider, for example, a Sydney buyer who has a $45,000 deposit for a $900,000 home in the scheme.
If prices fall in line with NAB forecasts, down about 10 percent by the end of 2023, their home would be worth $808,740.
But after taking out an $855,000 loan and making regular repayments, the owner owes $830,534, Canstar modeling shows. This means they owe $21,794 more than the value of their house, known as negative equity.
| Today | End 2023 Forecast | |
| Property Value | $900,000 | $808,740 |
| Loan Amount | $855,000 | $830,534 |
| Equity | 5% | -2.7% |
Thus, just because the federal government lifted its price caps for the Home Guarantee Scheme to $900,000 for Sydney siders, allowing a purchase with a 5 percent deposit without paying lenders’ mortgage insurance, does not mean you should consider a bigger loan.
Maybe to minimize your risks, it’s best to get your foot into the property market by buying an apartment worth $600,000 first?
Whatever your circumstances and decision, Bless Money can help you find the right property and the best-suited home loan.
Contact us today on 0466 110 995.