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Dec 13

Low Deposit Homes

Low rates have a high price tag for first home buyers

The value of housing loan approvals continued its upward trajectory in October, particularly for investors. But for first home buyers, it was an entirely different story: their activity has never been weaker.

It is a very different story for first home buyers. Recent surges in house prices, particularly in Sydney, appear to have effectively priced them out of the market. Despite the historically low mortgage rates offered by lenders, most first home buyers simply do not have the deposit or capacity to buy a home at current prices.

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Stories like this just go to show that the supposedly traditional way of buying a house by putting up a deposit and getting a bank loan is not working for everybody, as it never has. With governments around the country dropping  first home buyer grants  for various types of housing, and in some states for no housing at all it is no wonder the first home buyers stopped looking at the market.

A lot of people might say that $7000 is not a good reason to buy a house, but if you’re buying a home through a bank by having an extra $7000 for deposit instead of costs means you can increase your borrowing capacity on a 90% loan to value ratio by $70,000. As with many people it is not really/always the weekly cost that is the problem, it is the amount of money they need upfront. With record low interest rates the weekly payments are very low compared to what they have been for many years but the need for the large deposit is still there as it always has been and this is always the stumbling block for many people trying to enter the housing market.

Using Vendor Finance, this ‘deposit’ stumbling block is much smaller, and as long as the weekly payment is affordable and sustainable for the person buying a house it means that more people can experience home ownership rather than be condemned to rental slavery forever.

Properly structured Vendor Finance means that buyers can enter the property market with a much lower deposit and with the combination of growth and payments they will be in a position after a few years to get a bank loan based on the equity they have in the property at a time.

David Siacci