Is The First Home Loan Deposit Scheme (FHLDS) Right for Me?

By December 15, 2020Uncategorized

The First Home Loan Deposit Scheme (FHLDS) is a recent initiative by the Australian Government, that is designed to support eligible first home-buyers to purchase or build a new home sooner.

The Scheme is overseen and administered by the National Housing Finance and Investment Corporation (NHFIC) and began on January 1, 2020.

What is the First Home Loan Deposit Scheme?

Put simply, it enables eligible first home-buyers, with as little as a five per cent deposit, to purchase a property without the need to take out lenders mortgage insurance (LMI). According to the Government, this could save eligible first home-buyers as much as $10,000 – making buying a property more accessible.

For example, if you have saved $45,000 as a deposit towards the purchase of a $500,000 home, the government guarantees the first $55,000 of your loan, to bring your own security up to $100,000, or 20% of the total value of the property (excluding government fees, such as stamp duty).

It means that the FHLDS acts in a similar way to a Family Guarantee but, instead of the role of guarantor being filled by a family member, the Government steps in.

It’s important to note that this is not a cash payment but it can be used in conjunction with other government grants, schemes or concessions you may also be eligible for, such as any existing First Home Owner Grant or stamp duty concessions you qualify, depending on which State or Territory you live in.

FHLDS New Home Guarantee

The ‘New Home Guarantee’ (NHG) was established as part of the Government’s economic stimulus measures – designed to create jobs within the residential construction sector.

An additional 10,000 guarantees were made available in 2020-21 for eligible first home-buyers who are building a new dwelling, or buying a newly-built dwelling with a deposit of between 5 – 20 per cent of the property’s value (talk to your mortgage broker to understand how usual lending criteria applies). Property price caps are outlined, depending on your State or Territory.

What is a ‘new home’?

Eligible NHG properties include:

  • newly-constructed dwellings
  • off-the-plan dwellings
  • house and land packages
  • land plus a separate new home-building contract

The borrower buying the newly-built dwelling must be an eligible first home-buyer. Under the New Home Guarantee, owner-builder constructions are not eligible.

Am I eligible for the First Home Loan Deposit Scheme?

You must be an Australian citizen, over the age of 18. You can buy as a couple, but each party must fit the eligibility criteria. The Scheme is available for people who have never owned residential property in Australia – either as an investor or as an owner-occupier.

There are also important eligibility requirements related to salary, your home loan and the type of property. Asking for assistance from an experienced mortgage broker is a smart way to gain a better understanding of all the eligibility criteria and which lender may suit your own unique needs.

  1. Property requirements

To access the FHLDS, some restrictions on the type of property you can buy apply but the good news is that both established properties and new builds qualify. For the ‘New Home Guarantee’ (NHG), eligibility for first home-buyers means you must build a new dwelling, or buy a newly-built dwelling.

There are prescribed thresholds on the value of the property and these depend on your State or Territory and whether you live in a regional or metropolitan area.

First Home Loan Deposit Scheme (FHLDS)

Capital city & regional centres:

  • Australian Capital Territory – $500,000
  • New South Wales – $700,000
  • Northern Territory – $375,000
  • Queensland – $475,000
  • South Australia – $400,000
  • Tasmania – $400,000
  • Victoria – $600,000
  • Western Australia – $400,000

First Home Loan Deposit Scheme (FHLDS): New Home Guarantee

Capital city & regional centres:

  • Australian Capital Territory – $600,000
  • New South Wales – $950,000
  • Northern Territory – $550,000
  • Queensland – $650,000
  • South Australia – $550,000
  • Tasmania – $550,000
  • Victoria – $850,000
  • Western Australia – $550,000

Under the Scheme, a regional centre includes any location with a population greater than 250,000.

  1. Buying as a single or couple

You can qualify for the scheme as an individual buyer or as a couple. To be eligible as a couple, you need to be married or in a de facto relationship. The Scheme does not enable other partnerships to apply, such as purchasing a property with a parent or grandparent, sibling or friend.

  1. What is the salary threshold?

To qualify for the FHLDS, if you are buying a new home as a single, you need to prove earnings of $125,000 or less in the last financial year (proof of ATO Notice of Assessment is required) to qualify. If you are buying as a couple, your combined taxable income must be less than $200,000 in the last financial year.

  1. How much deposit is needed?

Saving at least a five per cent deposit is critical. Because the Government requires proof of ‘demonstrated savings’, Be aware that First Home Owner Grant money cannot be counted as part of this amount.

  1. Principal and interest loan

To be eligible, you must commit to a principal and interest home loan for the entire period of the guarantee. The only exception to this is if you take out a loan over both vacant land and to build a new home. In that circumstance, interest-only loans are eligible while your home is being built.

Owner/occupiers – not investors

Because the scheme is only open to owner-occupiers, you must be purchasing a home to live in, not as an investor.

The latest release of places was on July 1, 2020.

Allocated lenders include:

  • Australian Military Bank
  • Auswide Bank
  • Bank Australia
  • Bank First
  • Bank of Heritage Isle
  • Bank of us
  • Bendigo Bank
  • Beyond Bank Australia
  • Border Bank
  • Commonwealth Bank
  • Community First Credit Union
  • CUA
  • Defence Bank
  • Gateway Bank
  • G&C Mutual Bank
  • Indigenous Business Australia
  • Mortgageport
  • MyState Bank
  • National Australia Bank
  • People’s Choice Credit Union
  • Police Bank (including the Border Bank and Bank of Heritage Isle)
  • P&N Bank
  • QBANK
  • Queensland Country Credit Union
  • Regional Australia Bank
  • Sydney Mutual Bank and Endeavour Mutual Bank (divisions of Australian Mutual Bank Ltd)
  • Teachers Mutual Bank Limited (including Firefighters Mutual Bank, Health Professionals Bank, Teachers Mutual Bank and UniBank)
  • The Mutual Bank
  • WAW Credit Union

To find out more about how to apply for a Scheme place, you can contact the relevant lenders direct, or utilise a professional mortgage broker to give you a clear overview of the best possible lender for you.

If this specific scheme is not right for you, a good mortgage broker should be able to advise you of other potential options available to suit your own circumstances.

To learn more about whether you are eligible to take advantage of the First Home Loan Deposit Scheme or New Home Guarantee, talk to our mortgage broking specialists at Lending Specialists today.

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