The expanded First Home Guarantee can save a Melbourne buyer $38,000 to $47,500 in LMI. It also puts more buyers in the queue for the same homes.
The federal government has expanded the First Home Guarantee. Singles, couples, and now siblings or friends buying together can purchase with a 5% deposit and no lenders mortgage insurance.
On a $950,000 purchase in metro Melbourne, avoiding LMI saves somewhere in the range of $38,000 to $47,500. That is a genuine, immediate saving rather than a theoretical one.
The metro Melbourne price cap is $950,000. Across much of the eastern suburbs that rules out a large share of the stock, so check the cap for your specific suburb before you build a plan around it. Box Hill, Ringwood, Burwood, Camberwell and Surrey Hills all need looking at carefully rather than assumed.
Access to finance has improved. Affordability has not.
Three rate cuts since February have taken the cash rate from 4.35% to 3.60%, lifting typical household borrowing capacity by roughly 7% to 10%. For upgraders that has widened search ranges by something like $150,000 to $200,000.
When everyone can borrow more and the number of homes stays the same, the extra capacity ends up in the price. First-home buyer finance approvals in Victoria are up 21% year on year, and you can feel that at the opens.
CoreLogic recorded a 0.5% rise in August, a fourth consecutive month of gains. Clearance rates have been in the low 70s, with Doncaster East and Box Hill North both clearing above 75%.
The example that stuck with me was a Burwood East townhouse quoted at $1,150,000 to $1,250,000 that sold for $1,458,000. That is $258,000 over the guide, or 16.6%.
Treat it as a way to enter earlier with less cash, not as a reason to stretch to the cap. And do the valuation work regardless, because saving $40,000 in LMI is no help at all if you overpay by $100,000.
Note: this is general advice and does not take into account your objectives, situation or needs. Please consider whether it is suitable for you, and speak to a professional before making any financial decisions.
