First home buyers have been forced to save more of a deposit when purchasing new home and land packages on the Gold Coast.
This is due to the “great divide” between higher (builder and developer) contract prices over lower valuations.
When a borrower applies for a home loan the lender often orders a valuation of the property that they will accept as security for a loan. Unfortunately valuation firms are reporting much lower values compared to the final contract price for new home and land packages in the current market on the Gold Coast.
Lenders have been saying no to first home buyers with only a 5% deposit who have attempted to purchase new home and land packages on the northern end of the Gold Coast. First home buyers are being told to come up with the difference between the higher purchase price and the lower valuation of the property in addition to their 5% deposit.
Although some lenders may be offering 95% home loans, this is 95% of the lower amount of either the final purchase price or the valuation. In the current market on the Gold Coast, lenders are going with the latter, as valuations are frequently being reported much less than the purchase price.
An example of this is if a home and land package purchase price is $430,000 and a valuer assesses the home and land and deems it to be worth $390,000. The borrower must come up with 5% of the valuation ($19,500) and also the remaining $40,000 to cover the “great divide.” (Note: we have not taken into consideration lenders and other transactional costs in this scenario)
The $15,000 Great Start Grant and current stamp duty concessions are helping. However , when lenders costs such as Lenders Mortgage Insurance (LMI) is also added, first home buyers have been turning to family members for financial assistance.
The good news is there may be a solution to this funding problem. First home buyers are savvy young people and have realised that approaching a mortgage broker for expert advice is the solution. At Forward Thinking Finance we may have the solution to the problem of the “great divide”.
At Forward Thinking Finance we are accredited to offer a market leading product to allow parents of first home buyers to provide a 20% deposit, with the remaining 80% to be funded by the lender. This product allows parents to provide a loan of 20% to their adult children without providing their family home as guarantee for the loan. This product is the only product in the market place to date and is different to your standard home loan with a guarantor, where the family home may be put at risk in the event of default.
Would you like to know more? Then contact us today and arrange an appointment with our qualified and experienced mortgage broker.