Leading mortgage lender Resi Mortgage Corporation says whilst it’s regrettable for some first home buyers that the Federal Government has made such a late announcement to extend the period of the First Home Owners Grant Boost, it will allow others who haven’t already entered into contracts more time to increase their overall level of savings and underpin their ability to borrow.

 

Resi’s Head of Consumer Advocacy, Lisa Montgomery, says by using the extra six month period of the First Home Owners Grant (FHOG) Boost to establish a pattern of genuine savings, borrowers will be able to really shop around, knowing that a larger nest egg and increased preparation will add strength to meeting lenders’ criteria, thereby providing borrowers with a greater choice of lenders.

 

She says: “The FHOG Scheme – boosted or not - should be viewed by borrowers as a bonus to supplement their own funds, as those savings show lenders that the borrower is financially disciplined enough to commit to the rigours of a mortgage.”

 

Montgomery says it’s unfortunate there will be some borrowers who believed time was running out to take advantage of the FHOG Boost and who may now wish they could have taken more time to consider their approach regarding the purchase of their first property - instead of urgently rushing in as they watched the deadline approach.

 

“HHowever for those still in the hunt for a home, the Federal Government’s last minute announcement to extend and then phase out the boost to the FHOG over the next three to six months can now offer them a fresh opportunity to take their time and plan ahead,” she adds.

 

Montgomery says potential first home owners should now be considering the following:

 

 

The stringent lending criteria of many mortgage providers places significant importance on borrowers having an established pattern of genuine savings.

 

Therefore, by boosting their own savings, borrowers not only increase the number of lenders they can apply to, but they can also reduce the amount of Lenders’ Mortgage Insurance they may have to pay on the loan.

 

 

Borrowers should be realistic and acknowledge that interest rates, like property prices, are cyclical and they shouldn’t therefore allow themselves to fall into a false sense of security based on current repayment levels.

 

Despite the fact that interest rates are currently at historic lows, borrowers should always allow for the impact that a two or three percent increase in interest rates can potentially have on their personal situation and ensure if this happened, they would still be able to comfortably meet all their obligations.

 

This strategy also cushions the blow if there is an unexpected change to their circumstances such as the event of job loss.

 

The speculation as to how many more official rate cuts may be delivered this year by the Reserve Bank will continue and therefore shouldn‘t be relied upon in terms of trying to determine the best time to borrow.

 

If you are comfortable that you have taken the time to carry out all necessary due diligence and have researched what is available to you on the mortgage market, you shouldn’t try to then base your timing on when the next rate cut may or may not be delivered.

 

With the property and lending landscape now so different to two years ago, think about what you want from both your property and your lender and take the time to familiarise yourself with all the choices that are most appropriate for you.

Rather than simply chasing a good rate on your loan, think about the features on the loan and the service proposition of the lender. And for your choice of property, remember that you will have to live in the property for at least six months to quality for the FHOG Scheme, so ensure you are totally comfortable with your final decision.