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First Home Buyers

The First Home Loan Deposit Scheme Has Launched. Here’s What You Can Do.

Australia has welcomed 2020 with the First Home Loan Deposit Scheme’s kickoff.

The First Home Loan Deposit Scheme (FHLDS) opens up the real estate market to first-time homebuyers with a low minimum deposit of 5% and an exemption from Lenders Mortgage Insurance (LMI) fees. 

The government partners with buyers as the guarantor for up to three-quarters of the typical deposit most first-home buyers save for, ensuring that eligible buyers can enjoy the low minimum deposit. Buyers can also save as much as $30,000 in LMI fees.

However, there is a time limit on how long buyers can take advantage of the Scheme. The start of 2020 will see 10,000 places created, with 10,000 more to be created on July 1, 2020.

Who Are Eligible?

Only citizens of Australia, not permanent residents, are eligible. Because the FHLDS is meant to help lower-income earners buy a residential property, single people (18 years old and above) with taxable income not more than $125,000 per annum are eligible for full benefits. Couples who are married or in a de-facto relationship who earn up to $200,000 per annum in taxable income combined retain their eligibility.

Siblings, parent and child, or friends buying together are not qualified.

Applicants with less than 20% of the value of an eligible property saved are eligible for the First Home Loan Deposit Scheme. Applicants must be owner-operators of the property; investment properties are not covered under the Scheme.

Finally, applicants must be looking to pay back the loan in a traditional way (principal and interest), and they must be a first-time homebuyer without a previous interest in a property, either jointly or independently.

You must also be sure that you are looking to buy a property that is eligible. Each regional area sets its own property price threshold. The maximum value that you may consider in each capital city and regional centres can be found on the second page of this report.

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How to Apply

The First Home Loan Deposit Scheme works through partnerships with lenders. These lenders serve as the point of contact for the homeowner. The NHFIC has a full list of participating lenders

major bank and non-bank lenders

Source: NHFIC

Lenders may also have a list of their own authorised representatives that you can find by talking to the lender directly.

The NHFIC does not accept direct applications, nor does it provide any personal financial advice to prospects. If you are looking to participate in the First Home Loan Deposit Scheme, you may want to retain your own legal and financial counsel and consult with the participating lender for the most advantageous loan program.

There is no cost for the application itself, but you are responsible for any costs and repayments that are generated from the loan.

What to Do If Initial Application Is Not Successful

Even if your initial application is not successful, you do not lose your eligibility for the program. You are encouraged to reassess your situation and consult with your lender to address any problems that may be apparent in your application.

You do not have to wait for any specified period of time before you submit a reapplication. But do find out exactly what happened so that your next application has a better chance of being successful. 

You must first be sure that you satisfy the income tests and the lending requirements.

What the Scheme Could Mean for Approved Applicants

Applicants should understand that being approved could result in one or more of the following:

  • Save up to $30,000 in LMI premiums
  • Significantly reduces the time it takes to save a deposit 
  • On a $400,000 loan package that is taken to its full term, a buyer would pay $62,266 more than if he had purchased the same property with a 20% deposit
  • A buyer would be able to purchase a home about four years and three months earlier than if he had to save for a 20% deposit
  • Guarantees per state and territory are on a “first come, first served” basis
  • Depositing a lower amount will mean higher interest payments over the life of the loan
  • If house prices fall and you purchase a property with a 5% deposit, you risk ending up with mortgage bigger than the property value. This is called negative equity, and this could potentially make it difficult to sell your house or refinance. 

Properties You Can Buy

The First Home Loan Deposit Scheme is strictly for residential properties, and the definition of a residential property is authorised by the program, not by individual lenders. The types of properties that you can buy include the following:

  • An already constructed house, apartment or townhouse
  • A house that is connected to a piece of land
  • Undeveloped land that also has a contract to build an eligible residential home on that land
  • Off-the-plan townhouses or apartments

Depending on the type of property that you are looking to purchase, you may have to coordinate with different requirements and due dates. 

For example, the different price thresholds that were mentioned before apply differently depending on the size of the population in the area. 

Those with a population that is over 250,000 — the Sunshine Coast, the Gold Coast, Newcastle & Lake Macquarie, Geelong and Illawarra — all correspond to a capital city price threshold that is higher than in other regional areas. 

The First Home Loan Deposit Scheme price thresholds recognise that these high-population areas usually have a higher cost of living and a higher average home price.

What’s Your Next Step?

Buying a home for the first time should be exciting, not complicated! We are ready to help you get into the property of your dreams.

Shore Financial has built strong relationships with participating lenders. Contact Shore Financial to be pre-assessed for eligibility. Our team can walk you through the process of the First Home Loan Deposit Scheme. 

Time is of the essence in a highly competitive market — so leave us a message today so we can start the process.


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