How about the form of a major Qld builder who is advertising finance of 435k for $339/week with their "kickstart program"? When you read the terms and conditions, you read that the first home owners grant of 21k, plus their own grant of 9k is used to "reduce the repayments to $339/w". By my calculations at the 6.21% they are offering, repayments on a 30 year loan would be $573/w. That 30k of grants wouldn't last more than three years if it's funding the shortfall. They are a bit light on details in their terms and conditions. I think it's close to misleading advertising.
That does sound a bit light on stumpy. BTW, does Qld have a concession on stamp duty for first home buyers (like NSW's exemption up to a set limit)? If not, this would be even more inaccurate.
Having checked your calculations, this seems to be right – also checked with a 20% deposit and the normal repayment would be about $454 per week.
Is this another example of a resetting mortgage (AKA US mortgage scheme) or similar to a low start loan?
Yes Qld does have a FHB concession on Stamp Duty.
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Just one point about the FHB stamp duty exemption (it's 500k in Qld): (this is off topic, but who cares)
When you build a house land package with some developers, eg Stockland they give you a separate contract for the land (with them) and the house (with the builder), and consequently you only pay stamp duty on the land and not the home. The bummer is though, that in Qld you only get a 150k limit for first home buyer exemption when buying vacant land to build on. Most blocks in the Stockland developments are ~220-260k which may be enough to blow away your first home buyer exemption, so if you're a FHB, then you need a house/land package in one contract, ie a recently completed home, but if you're not a FHB, then it's best to get the land contract separate. Go Figure!
As for the low start: I assume they are somehow getting you to quarantine your grants and use them piecemeal as part of your repayments. There's no mention of what rate of return your 30k of grants is getting in the process. If it were up to me, I'd be simply letting the grants sit in an offset account that's being directly debited with the loan repayments. If you need to reduce the payments in the first few years, then you just let its balance run down while you're feeding it with whatever payments you can from your income.StumpCam wrote:As for the low start: I assume they are somehow getting you to quarantine your grants and use them piecemeal as part of your repayments. There's no mention of what rate of return your 30k of grants is getting in the process. If it were up to me, I'd be simply letting the grants sit in an offset account that's being directly debited with the loan repayments. If you need to reduce the payments in the first few years, then you just let its balance run down while you're feeding it with whatever payments you can from your income.Either way, you are still going to have to stump up with at least a 20% deposit and then the repayments will not meet the interest being charged.
Of course Scott, that's the whole Idea. Instead of using their shonky system to reduce the payments in the early years, you control it yourself via your offset account buffer. You let the balance run down by not covering the interest fully. It's all about making the loan more affordable for a limited period. Whether this is a sensible strategy or not isn't the point.
The 20% deposit isn't relevant to their repayments. They are simply quoting a repayment rate for a particular loan size, assuming you've taken care of the deposit. The whole basis for their ad campaign is to reduce your repayments using your grants as a buffer. What I object to is the lack of details about how long this buffer lasts and at what return it is producing, ie what interest rate it is generating or offsetting.
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