We’ve had a lot of interest from people regarding the ‘First Home Loan Deposit Scheme’, curious to know whether they are eligible. We decided to put together a quick ‘at a glance’ reference on THE FACTS to help you figure out if this great opportunity on the market is suitable for you. You can also read our article on FHLDS – Your questions answered! for a more in-depth exploration of the frequently asked questions in relation to the Scheme.
What is the First Home Loan Deposit Scheme?
The Scheme is an initiative by the Australian Government in conjunction with the National Housing and Finance Investment Corporation (NHFIC) introduced to help people venture into home ownership sooner with as little as a 5% deposit and not having to pay Lender’s Mortgage Insurance (LMI).
A big perk of the scheme is that it can be used in conjunction with the First Home Super Saver Scheme and the First Home Owners Grant (FHOG).
There are 10,000 guaranteed loans per year from 1 January 2020.
How does the Scheme work?
There is an appointed panel of participating lenders who will lend 95% of the property value without charging LMI to those approved under the Scheme. The government guarantees 15% of the property value that makes up the balance of the 20% deposit generally required by a lender to approve a loan without charging a higher interest rate and/or LMI.
What type of property can be bought under the Scheme?
There are various options for purchase under the Scheme, the main requirement is that it is a ‘residential’ property. Your broker can help you navigate the specific requirements for each of the following;
- Established house, townhouse, apartment
- House and land package
- Land with separate build contract
- Off the plan apartment or townhouse
Who is eligible?
- Australian citizens who are at least 18 years of age
- Singles with a taxable income of up to $125,000 per annum for the previous financial year and couples with a taxable income of up to $200,000 per annum for the previous financial year. For all Scheme applications made from 1 January to 30 June 2020, the relevant financial year will be 2018-19.
- Couples are only eligible for the Scheme if they are married or in a de-facto relationship with each other. Other persons buying together, including siblings, parent/child or friends, are not eligible for the Scheme.
- The Scheme is to assist singles and couples (together) who have at least 5 per cent of the value of an eligible property saved as a deposit. If you have 20 per cent or more saved, then your home loan will not be covered by the Scheme.
- Loans under the Scheme require scheduled repayments of the principal and interest of the loan for the full period of the agreement (with limited exceptions for interest-only loans, which mainly relate to construction lending).
- Applicants must intend to be owner occupiers of the purchased property. Investment properties are not supported by the Scheme.
- Applicants must be first home buyers who have not previously owned or had an interest in a property in Australia either separately or jointly with someone else (this includes residential strata and company title properties).
Are there property price thresholds?
Yes, the aim of the Scheme is to enable people to get into their first home sooner so the thresholds are relevant to a modest home within specific areas. The thresholds vary in relation to Perth city and WA regional centres which is capped at $400,000 versus the rest of the state at $300,000.
A regional centre is defined as an area with a population over 250,000; allowing for the simple fact that the cost of property is higher in those areas in contrast to the smaller towns across the state. Your broker will be able to give you a quick answer regarding the threshold in your desired suburb.
How do I apply?
Speak to your broker who can find out if you are eligible, help you get your finances prepared, and navigate the market for the right loan product amongst the participating lenders that will suit your specific circumstance. At this stage your broker can also look into whether you are eligible for the `First Home Owner’s Grant’ in conjunction with the FHLDS.
Owning your first home in 2020 may well be a lot easier and happen sooner than you expected!