paisneil said:
Hi
Homepath called me to say that for first home owners there no longer is a requirement to substantiate a 5% genuine savings for a loan of 95%.
I wonder if any other banks have the same policy
regards
Sunshine
G'Day Sunshine
There has been a quiet revolution in lending as the market has contracted, and lenders are becoming much more competitive with each other to the benefit of the borrower.
However, the shift in some lender's criteria is not just about the first home buyer, but about all borrowers.
This shift is of particular benefit to low income earners or people who find it very difficult to pay rent, run a household and to save even a few thousands of dollars for a deposit.
I have a young couple at the moment who are paying a low rent but will probably have to move soon as the house will be demolished. They thought they'd never be able to buy a home of their own, and have concentrated their efforts on buying furniture and paying off their (secondhand) cars.
However, with the help of the $7,000 First Home Owner's Grant plus the Victorian First Home Buyer's Bonus of $5,000 (until December, 2005) and with a bit of help from their families (not much if they can save a bit, too), they will be able to look for a modest first home to buy before the end of the year.
For example, if they buy a property for $190,000 (Outer Eastern Melbourne) with a 100% loan they will need to contribute about $3,750, with a 95% loan they would need about $7,500. If they buy at $250,000 with a 100% loan they will need about $9,300 or with a 95% loan about $14,500.
They can certainly afford the repayments and there is a broad selection of choice between units and full houses in this price range, and luckily for them one of the specialist lenders released their 95% 'no genuine savings' product only last week at the discounted rate of 6.76%.
In these days of deregulation of markets, we can forget that it is all about the competitive nature of markets. Loans are a product the same as cauliflowers and cornflakes. The money may not have a 'best before' date but if it is not out there earning more money then it is costing the lender dearly.
Build a better mousetrap? Give the people (customer) what they want, and what home buyers and investors are asking for is greater flexibility in lending, to use less of their own money to set the deal up, to have access to discounted or 'step down' interest rates, and for fees and charges to be deferred for a reasonable period of time.
This is one happy young couple who can see that they, too, can actually afford to buy their own home, and if they can make a decision before Christmas then they will be smiling all the way to the bank as they unwrap their $12,000 Christmas present!
Ho Ho Ho
Kristine