What is the First Home Loan Deposit Scheme?
The First Home Loan Deposit Scheme is an Australian Government initiative to support eligible first home buyers purchase their first home sooner.
Usually first home buyers with less than a 20 per cent deposit need to pay lenders mortgage insurance. Under the Scheme, eligible first home buyers can buy their first home with a deposit as little as 5 per cent (subject to lenders credit criteria), with the National Housing Finance and Investment Corporation (NHFIC) guaranteeing up to 20% to the participating lender. It is similar to a parental or family guarantee but in this case the NHFIC acts as a guarantor. The guarantee is not a cash payment.
What is Lenders Mortgage Insurance?
Lenders Mortgage Insurance (LMI) is a form of insurance that is taken out by the lender to protect themselves should the customer default (e.g. can’t repay their loan). It is a once off premium that the borrower pays and is generally only required if the borrower has less than 20% deposit to put towards their home purchase. The key point to remember is that LMI covers the lender, not the borrower.
Is This Scheme Available to All First Home Buyers?
There were only 10,000 scheme places made available for the 2019/2020 financial year and these have now been reserved. However another 10,000 scheme places will be made available for next financial year from 1 July 2020.
If you are a first home buyer and missed out on the first round, we still encourage you to get in contact with us as the reserved places may become available if the applicants do not proceed with their purchase.
Also note that the scheme has only been made available to 27 participating lenders.
How Do I Apply?
You can apply directly with a participating lender or contact a mortgage broker, like 8 Collective to arrange the application for you (direct applications to the NHFIC are not accepted).
Once a Scheme place has been reserved for you, it can only be changed by withdrawing and starting a new application so before you apply it’s recommended that you are clear on whether you will purchase your property as a single or as part of a couple.
For your application you (and your partner if applicable) will need your Notice of Assessment for your taxable income for the previous financial year.
Who Is Eligible?
- Australian citizens who are at least 18 years of age. Permanent residents are not eligible
- Singles with a taxable income of up to $125,000 per annum and couples with a taxable income of up to $200,000 per annum.
- Incomes will be assessed for the financial year preceding the financial year in which the loan is entered into.
- Couples are only eligible for the scheme if they are married or in a de-facto relationship. Other persons buying together, including siblings, parent/child or friends, are not eligible for the Scheme
- Applicants must have a deposit of between 5 and 20 per cent of the property’s value with the NHFIC guaranteeing the remaining difference (up to 20%).
- Loans under the Scheme require scheduled repayments of the principal of the loan for the full period of the agreement. If the loan relates both to the purchase of vacant land to the construction of a house on the land, the loan may be an eligible loan even if the terms of the loan agreement permit interest-only repayments for a specified period.
- Applicants must intend to move into and live in the property as their principal place of residence (i.e. they must be owner occupiers).
- Applicants must be first home buyers who have not previously owned or had an interest in a residential property either separately or jointly with someone else (this includes residential strata and company title properties, regardless of whether it was an investment or owner-occupied property and whether it was ever lived in).
What Type of Property Can Be Bought Under the Scheme?
- An existing house, townhouse or apartment
- A house and land package
- Land together with a separate contract to build a home
- An off-the-plan apartment or townhouse
Is There a Maximum Purchase Price?
To ensure the Scheme is only available for the purchase of a modest home, or the purchase of land and construction of a modest home, the following property price thresholds (maximum property purchase price under the Scheme) will apply in capital cities, large regional centres and regional areas:
The capital city price caps apply to large regional centres with a population over 250,000 (the Gold Coast, Newcastle and Lake Macquarie, the Sunshine Coast, Illawarra (Wollongong) and Geelong), recognising that dwellings in large regional centres tend to be significantly more expensive than other regional areas.
Look up your suburb or postcode on the NHFIC website to see the property price threshold.
We can now reserve a place in the Scheme for our customers subject to availability.
Due to the limited number of slots on offer, we recommend that first home buyers contact us asap so that we can get your applications pre-assessed. To apply and reserve a place in the next round of Scheme places give our finance team a call on 1300 344 888.