Victorian home buyers are facing paying thousands of dollars in extra stamp duty costs when discounts end on June 30, meaning they may have to borrow more from the banks or from their family, mortgage brokers say.
Stamp duty discounts were introduced by the Victorian Government last year to keep the property market afloat during the worst of the coronavirus pandemic, including a 25 per cent discount for existing properties priced under $1 million and a 50 per cent discount for new home builds.
But from July 1, anyone who signs a contract of sale for an existing home will be slugged full stamp duty costs.
Foster Ramsay Finance mortgage broker Chris Foster-Ramsay said in the worst-case scenario was buyers who bought unconditionally from July 1 and had no way of paying for the extra stamp duty could lose their deposit and see their purchase fall through.
The changes to stamp duty could also affect those who had pre-approved loans that had been approved with the lower stamp duty costs, Mr Foster-Ramsay said.
“There will be a 25 per cent hole in borrower’s numbers in stamp duty calculations,” Mr Foster-Ramsay told Domain. “What we then expect to see, for those with a low deposit, or who are stretching themselves to buy a house, is there will be a couple of problems.”
Some buyers may have to consider borrowing extra to cover stamp duty, meaning they could also face the extra costs of Lenders Mortgage Insurance, ProSolution Private Clients associate director and mortgage broker Jodi McKeown said.
“They may have to take their loans up to 82 per cent of the value of the home, rather than 80 per cent,” Ms McKeown said. “Some lenders give a waiver of LMI for loans up to 85 per cent, so they may need to find a new lender.”
Ms McKeown said buyers were advised not to sign a 30-day contract to give them time to get their finances in order after Victoria’s stamp duty discounts end.
While there would be some extra paperwork for some clients, many had been planning for the eventual rise in stamp duty costs by deferring their plans to buy for longer, allowing them to save more.
Some were paying down their debts, such as the Higher Education Contribution Scheme, and reducing larger limits on credit cards to be able to borrow more.
“Another strategy is getting help from their parents or getting a family guarantee,” Ms McKeown said. “I don’t think it’s a deal-breaker; people will still be able to buy.”
Loan Market mortgage broker Daniel Koutzamanis agreed and said people would need to rethink how much they had to spend on an apartment or house, taking the extra stamp duty costs into account.
“The amount they’ll have to borrow will always remain the same, but what they can spend will come down,” Mr Koutzamanis said.
He said couples with families looking to upsize their homes would most likely be affected by the end of stamp duty discounts.
First-home buyers purchasing a home under $600,000 would be exempt from the land transfer duties and were likely to look for homes under that price.
Those buying their second or even third home for under $1 million would be slugged with the higher duties for the exchange of ownership.
“What we generally have done is gone to the banks with a worst-case scenario and factored in these extra costs,” Mr Koutzamanis explained. “But for those who have been pre-approved, it is going to affect those clients, and they may have to amend their applications.”
Original article found at https://www.domain.com.au/news/end-to-stamp-duty-discounts-in-victoria-could-see-buyers-needing-to-borrow-more-1066365/