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How much Stamp Duty will a First Home Buyer pay in 2017??

How much Stamp Duty will First Home Buyer’s have to pay after June 30th 2017??

Victorians first home buyer’s will be welcoming changes made by the state government in July 2017, reducing the amount of stamp duty in full in some cases. Victorians pay among the highest stamp duty fees in the country, so this could be a game changing move for first home buyers struggling to get into the property market.

We’ve had a look at what is changing:

  1. Stamp duty will no longer apply to first home Buyers buying for Less than $600,000!
  2. Stamp duty discounts will now be available for purchases up to $750,000, as opposed to $600,000 currently!
  3. First home buyers building in Regional centres will now be entitled to $20,000 instead of $10,000, + no Stamp duty on the land!

This change means a couple of things in my opinion, but firstly, let’s start with understanding the main effect Melbourne buyers will need to be aware of.

Here are two scenarios for you to consider when looking at the current climate, Vs the new.

Scenario 1: Buying Pre-July 2017

If a young couple saved tirelessly for a couple of years and had $60,000 put aside to buy their first home, they would be looking at paying $12,360.60 in government costs made up mostly of stamp duty.

This means if they brought for $500,000, and wanted to put down a 10% deposit, they would pretty much be out of cash and that would be their maximum purchase price. If they used less of their deposit their mortgage insurance would go through the roof. See below.

If they put in 10% deposit, mortgage insurance will be approx. $8,350

If they put in a 6-7% deposit, mortgage insurances launches to $14,000.

Now let’s look at what that same deposit can buy you after July 2017.

Scenario 2: Buying Post-July 2017

If the same young couple had $60,000 after the changes are introduced in July 2017, they would be in a position to buy a property for $600,000! A figure much closer to representing what you need to spend in Melbourne these days to put a roof over your head.

As for the mortgage insurance, they are still able to put in a 10% deposit, so the mortgage insurance isn’t too scary.

If they put in 10% deposit, mortgage insurance will be approx. $10,000

Only $1,700 more in mortgage insurance, to buy a home worth $100,000 more.

They are a few of the most obvious benefits to buyers. But it will be interesting to see how the market responds to these changes, we are going to have a whole bunch of people who are currently chasing properties worth $400,000 – $600,000 now able to buy for $500,000 – $700,000. I think this will pose a risk to fast increases in the value of homes at the lower end of the Melbourne market. And that what we now see at the first home buyers’ market, will jump by $200,000. Time will tell.

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