If you’re a first home buyer and you’re looking for one of the best offers to hit the market to help you navigate your way into home ownership with ease then you have most likely heard about the announcement of the Australian Government’s ‘First Home Loan Deposit Scheme’. Now if you haven’t been privy to this exciting development in the market, you can read more about THE FACTS here. Also continue below as we answer the most common questions in relation to the scheme that could see you own your own home with as little as a 5% deposit and paying no Lenders Mortgage Insurance (LMI).
Too good to be true? The key to success is in speaking with your broker who will help you get prepared, so you are well positioned with the opportunity to be the recipient of only 10,000 applications accepted nationally. Your broker will be able to identify whether your specific circumstance qualifies you as eligible for the Scheme.
How does the Scheme work?
Successful applicants can borrow up to 95% of the value of their desired home without paying Lender’s Mortgage Insurance (LMI), if you have saved 5% of the purchase price. Normally the lenders would need the full 20% deposit to satisfy their criteria to approve lending 95% of the property value without the applicant paying Lender’s Mortgage Insurance.
Do I receive a cash payment?
No, the ‘guarantee’ from the government is to give the lender security against your ability to make the repayments on the 95% of the loan. It is not a cash payment you receive for your home loan.
Am I eligible?
There are a number of eligibility criteria in relation to your personal and/or household income as well as the purchase price of the home which differs depending on whether you are purchasing in the Perth metropolitan or regional areas. You can find out more about the relevant property price threshold in the suburb you are looking to purchase in here. The best first step is to speak to one of our expert brokers who specialise in helping people with home loan success through the scheme, you can book a call here.
When can I apply?
The Scheme commenced on 1 January 2020, so the answer is NOW! Being the very first year, interest is hot and there is a queue for the processing of applications. The sooner your application is in, the better. Even if you haven’t found the property you want to purchase as yet, that is ok, the immediate action is to get the ball rolling and you can continue to look at property in the meantime.
I have already signed a sale contract for a property, can I still apply?
Your broker will be able to look at your contract and settlement dates for the type of property you are purchasing to ascertain whether you can still apply. Yes, there is a possibility.
How can I get started?
The Scheme has a list of approved, participating lenders, it is important to speak to one of our brokers who have access to both major and non-major lenders approved under the Scheme. The individual bank policies in relation to the scheme do vary, all of which we are up to date with – it is important to review the products available and find the right solution for you rather than look at only 1 or 2 options that may not be right for your circumstance.
How long does it take to find out if I have a guarantee?
The process involves two steps, first your broker will send your request to a participating lender who will then lodge your details for the guarantee. Once your spot is confirmed the bank has 10 days to issue you with a pre-approval, you then have 90 days to find a property you would like to purchase.
The key is that your broker will also be able to advise you on the application process to guide you and position you well for a successful application that will save you a lot of time and headaches!
Will there be a change to the property price thresholds?
The Australian government, through NHFIC’s (National Housing Finance and Investment Corporation) Investment Mandate set the property price thresholds for the Scheme.
Can I make an off-the-plan purchase with the guarantee?
Yes! As long as the eligibility criteria are met, this is an option. There are a couple of conditions;
- Before the settlement date of your home loan, you must have signed the contract of sale.
- Within 90 days that your home loan becomes guaranteed under the Scheme, the settlement date for your home loan must occur.
Can I purchase a house and land package or build my own home with the guarantee?
Yes! As long as the eligibility criteria are met, this is an option. You can use the guarantee for either a house and land package or a land and separate contract to build. Your broker will be able to assist you with the requirements as they each have their own set.
Will the lenders charge a higher interest rate when applying with a Scheme guarantee?
The good news is no! Whether you are applying for a loan with a scheme guarantee or not, all participating lenders have agreed; not to charge a difference in interest rate.
Can I use the First Home Owners Grant or First Home Super Saver Scheme in conjunction with the First Home Loan Deposit Scheme?
2020 is clearly a great year for first home buyers as the answer is a very simple YES.
To find out if you are eligible, be set up for success and get prepared, this is a great time to contact your broker. It will also put you ahead of the curve… and the competition. As a trusted adviser for 1st Home Buyers, we will guide you every step of the way. You can book an obligation free consult here or give us a call on (08) 9367 4222.