What is the First Home Loan Deposit Scheme

Are you a first-time homebuyer and need some assistance getting into the property market? Don’t worry. There is help available with the First Home Loan Deposit Scheme (Scheme).

What is it?

Scheme is a special program offered by the Australian Government and operates through the National Housing Finance and Investment Corporation (NHFIC).

Its purpose is to help first time home buyers purchase a home by providing a guarantee to participating lenders.

The lenders enable homebuyers to apply for a home loan with deposits as low as 5%. Borrowers also don’t need to pay Lenders Mortgage Insurance (LMI) fees, saving them anywhere from $10,000 to $30,000.

The first program began on January 1, 2020. An additional 10,000 will be available on July 1, 2020. The Government acts as the mortgage insurer and guarantees the loans for first time home buyers who meet the eligibility requirements.

What are the Eligibility Requirements?

Certain factors, such as relationship status and income, could determine whether you will be able eligible or not. You must meet the following criteria to quality:

  • Must be a current Australian citizen 18 years or older.
  • Only couples who are married or in a de-facto relationship are eligible.
  • You must have at least 5% of the property’s value for a deposit but not more than 20%.
  • Applicants must move in and live in the property. It is not intended for investors.
  • Income is assessed based on the financial year preceding the year in which you apply for the loan. Singles with taxable income no more than $125,000 and couples with taxable income no more than $200,000 are eligible.
  • The Scheme is only available for first-time homebuyers who have not previously owned or had an interest in a residential or company-owned property either on their own or with someone else.

Conditions and Property Pricing Thresholds

The types of residential property that you can buy under the Scheme include:

  • A land and house package
  • An existing apartment, house, or townhouse
  • An off-the-plan townhouse or apartment
  • Land along with a separate contract to build a home on it

Some specific requirements and dates apply for different types of property.

The Scheme is available for first time home buyers to purchase a modest home. There are maximum purchase prices that apply in large regional centres, regional areas, and capital cities.

For example, the price cap for:

  • NSW-capital city is $700,000
  • VIC – capital city is $600,000
  • QLD- regional centre (Gold Coast) is $475,000
  • WA – capital city is $400,000
  • Northern Territory is $375,000

Potential applicants can figure out how much they should save for a deposit by knowing the pricing thresholds.

If you leave the property before paying off the loan, it is no longer guaranteed by the Scheme. There might be terms and conditions of your loan requiring that you take specific actions in such a situation.

You might need to take out insurance or pay charges and fees. For more specific conditions that apply to your loan, check with your participating lender.

How to Apply for the First Home Loan Deposit Scheme?

NHFIC has an FHLDS eligibility tool to give you a general idea if you will qualify. The tool is intended to be used only as a guide and doesn’t necessarily mean you will receive a loan or a guarantee.

All applications must be made directly with one of the Scheme’s participating lenders , an authorized representative, or a mortgage broker.

An authorized lender is a lending institution appointed by NHFIC to offer guaranteed loans under the Scheme.

Do not send applications to the NHFI. They also can’t provide any personal financial advice.

You should consult with a participating lender to get legal and financial advice to apply for and arrange a loan agreement that best suits your needs.

Effective January 1, 2020, Commonwealth Bank and nab are major bank lenders. Some of the non-major lender available since February 1, 2020 include:

Click here to see all the non-major lenders participating in the First Home Loan Deposit Scheme. If you meet the criteria and want to apply for a Scheme loan, contact a participating vendor.

The First Home Loan Deposit Scheme can help some Australians get into the real estate property market who previously struggled to do so.

Can I use a gift or borrow the 5% deposit for the purchase?

If you are putting down a 5% deposit for the purchase, lenders will require your deposit to be considered as ‘genuine savings’. Any lump sum deposits paid into your account is required to sit in your bank account for a minimum of 3 months for the deposit to be genuine savings.

There are other ways to satisfy this condition such as

  • Lump-sum savings held at least 3 months
  • Term deposits held for at least 3 months
  • Consistent savings over-time such as apportioning your salary to a savings account 
  • Cash gift held for at least 3 months
  • Inheritance funds held for at least 3 months
  • Shares or managed funds held for more than 3 months 
  • Rental Ledger (most lenders will require 12 months’ worth of history, but some lender may consider 3 months of rent if it is paid on time)
  • Equity in an existing property 
  • Salary sacrifice to your First Home Super Saver Scheme account
  • Proceeds of sale from another property

** General Advice Warning

The information provided on this website is general in nature only and it does not take into account your personal needs or circumstances into consideration. Before acting on any advice, you should consider whether the information is appropriate to your needs and where appropriate, seek professional advice in relation to legal, financial, taxation, mortgage or other advice.

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