Aspiring first homebuyers at Dubbo could need a deposit of less than $20,000 to secure a median-priced dwelling in the city, under a federal government scheme that starts on January 1.
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The First Home Loan Deposit Scheme will provide eligible first homebuyers with guaranteed loans.
Approved applicants will be able to purchase a home with a deposit of as little as five per cent, allowing them to get into the market sooner.
A five per cent deposit would mean a buyer at Dubbo would need $18,750 to buy a $375,000 property - the median house price in the city in June, according to Core Logic data.
The scheme, an election commitment by the Coalition, will support up to 10,000 guarantees across Australia each financial year.
Two major banks will start offering the guaranteed loans from January 1, with another 25 non-major lenders coming on board from February 1.
Aspiring home owners have already been showing keen interest in the lead-up to the scheme.
Matt Wright, Dubbo franchise owner of mortgage broking business MoneyQuest, reported he and other brokers in the industry had seen a spike in inquiries in the final weeks of 2019.
"While the scheme doesn't officially commence until January 1, buyers are already keen to find out the finer points of the scheme, including the eligibility criteria and the actual value they'll receive under the scheme," he said.
"We're certainly seeing a sharp rise in inquiry."
Mr Wright said in essence, borrowers would avoid the cost of lenders' mortgage insurance (LMI), normally payable when a loan exceeded 80 per cent of the security property value.
"The cost of LMI can be extreme and in some cases an impediment to loan approval," he said.
"In fact, the LMI cost could exceed $10,000 on a loan of 95 per cent of the current $370,000 median house price in Dubbo."
The scheme's target is people on low and middle incomes.
Applicants will be subject to eligibility criteria, including having taxable incomes of up to $125,000 per year for singles and up to $200,000 per year for couples and eligible property price thresholds.
The property price threshold for Dubbo and many other regional centres in NSW is $450,000.
To promote competition, the government has directed that the total number of guarantees issued to major banks in a financial year must not exceed 5000 - half the maximum total.
"The scheme will be limited to only two of the big four banks, with 50 per cent of the allocation reserved for second-tier and smaller lenders, which is great for competition in the lending market," Mr Wright said.
Assistant Treasurer and Minister for Housing Michael Sukkar said in November when announcing the first appointment to the panel of participating lenders the scheme would help more first homebuyers purchase a home sooner.
"The... scheme has been specifically designed to support first homebuyers purchase a modest home, getting them into the property market sooner," Mr Sukkar said.
"The scheme has been warmly welcomed by major industry peak bodies, as well as a broad spectrum of lenders..."