More South Australians will be able to get into their own homes sooner after the state government backed a 2% deposit scheme.
Lender HomeStart Finance has introduced its minimum deposit requirement for its graduate loan to 2%, the first time the loan has been offered with the potential of wiping months off saving plans.
HomeStart is a state government-backed organisation with a loan portfolio of $2.3bn that provides low-deposit home loans to eligible South Australian homebuyers.
HomeStart CEO Andrew Mills (pictured above left) said unlike many commercial lenders, HomeStart also does not require LMI, which can cost borrowers more than $10,000.
“This means more South Australians can buy their own home sooner than may otherwise be possible,” Mills said. “Thousands of South Australians are saving hard to buy a house and this could make the difference to them taking that step.”
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The graduate loan is available to South Australian residents with a Certificate III, IV, Diploma, bachelor’s degree or higher qualification. The graduate loan is available in metro and selected regional areas, with the home required to be bought or built as the purchaser’s primary residence.
“We currently have more than 2,000 graduate loans on our books with 619 of them settled in the past financial year,” he said. “Of these, 84% were first home buyers, 63% were couples and 42% were for the construction of a new home.”
Mills said the reduction in the deposit requirement for its graduate loan would be life changing for those eligible and aspiring to buy their own home.
“Many South Australians are struggling to save enough to pay for the ever-growing deposit on a home, particularly from traditional lenders and rising house prices keep putting home ownership beyond their reach,” he said.
“The 2% graduate deposit loan is another way in which HomeStart continues to adapt and innovate to address housing affordability concern and help more South Australians into their own home sooner.”
Adelaide broker Cindy Schofield (pictured above right) of Bernie Lewis Home Loans said it was great to have another alternative to offer clients and potentially get them into a home of their own sooner.
“The biggest challenge for a lot of clients is being able to save the deposit required whilst paying rent (especially in the current rental market),” Schofield said. “Even those who are lucky enough to be living at home, the thought of saving 5% plus fees can be daunting and sometimes unachievable.”
Schofield said it was all about providing choice for clients.
“If we can give our clients an option to consider where they can reduce the deposit required, remove the need for lenders mortgage insurance and we can tell them they’re closer to their goal than they thought, then that’s a good thing,” she said. “Clients now just have to find a property to buy, which is often the next challenge.”
Schofield said this new offering could potentially put more pressure on house prices in Adelaide’s tight property market.
“In turn, this might put pressure on people to reassess their purchase price limits. The feedback I’ve received from agents and clients is that there is still a lack of supply but plenty of people looking and wanting to buy,” she said.
“I have some clients who have been looking for 12-18 months and are yet to be successful, so adding more purchasers into that mix will make that harder.”
Schofield said her advice to potentially eligible South Australians was to speak to a broker early.
“It’s important to get expert advice to see where you’re at, does this new incentive mean that you are now ready to purchase or do we need to develop a plan to get you where you need to be,” she said. “It is really important to have someone you trust in your corner, who will be honest with you and will help you navigate the home loan process, from signing a contract right through to the settlement of your new home.”
