The Coalition’s First Home Loan Deposit Scheme could save first-home buyers years in accumulating a 20 per cent deposit. But it could also cost the buyer about $53,000.
Crunching the numbers on a hypothetical first-home buyer scenario shows that while the scheme is a better alternative to securing lenders mortgage insurance, it will cost tens of thousands more than a 20 per cent deposit over the life of the loan.
The First Home Loan Deposit Scheme, while ultimately adopted by Labor, differed from Labor’s broader campaign of housing affordability. Rather than lowering house prices through tax reforms, it creates a quicker, but more expensive way, for first-home buyers to enter the existing property market.
First-home buyers should look long and hard at the scheme before jumping at it, paying particular attention to additional servicing costs as well as factoring in potential capital gains and the cost of renting while saving.