The start of the new year has never been better for first-time home buyers in Australia. On January 1, 2020, a new scheme that’s designed to help new home buyers purchase their first property was launched by the Government. It’s called the First Home Loan Deposit Scheme and it’s available to the first 10,000 successful applicants.
How does it work?
With the First Home Loan Deposit Scheme, the government will guarantee 15% of the house deposit for new home buyers who have already saved the initial 5%.
Applications must be done with the participating lenders and once approved, the home buyers will have 10 days to get a pre-approved loan to buy a property and settlement must be finalised within three months. After the settlement, the first-time home buyers must move into their new homes during the following 90 days.
Who are eligible?
To be eligible for the First Home Loan Deposit Scheme , you must be an Australian citizen who is a new home buyer, 18 years of age and hold a Medicare Card. Your yearly income must not exceed $125,000 per year as an individual or $200,000 as a couple.
You must be an applicant for an owner-occupied loan with principal and interest repayments, and the property must be residential (apartments, townhouses, and house land packages) with price within the cap assigned to your state or territory, which you can find at the National Housing Finance and Investment Corporation (NHFIC)’s website.
There’s also a price threshold (maximum property purchase price under the Scheme). This is to ensure the scheme is only available for the purchase of a modest home or the land of a modest home. Here you can find all property price thresholds.
What are the benefits?
The First Home Loan Deposit Scheme will allow you to get your first property sooner because you’ll only need to save 5% for the deposit instead of the usual 20%. This will save you a lot of time in saving for the house deposit. Here’s some tips on how to save. It will also save you thousands of dollars in Lender’s Insurance Mortgage (LMI) premium, which applies if the deposit is less than 20%. But since the Government will be guaranteeing the remaining 15% deposit, the LMI will not be applicable.
How to apply?
You need to apply directly to the Commonwealth Bank, National Australia Bank, and 25 other small lenders, which include, Bendigo Bank, Queensland Country Credit Union, and Auswide Bank among others. The NHFIC will not accept direct applications. Here’s a list of all eligible lenders.
From February 1st, the 25 non-major lenders will start handling the remaining 5,000 applicants, out of the total 10,000 available. You must submit proof of your eligibility including proof of being a first-time home buyer, 18 years of age, and within the yearly salary cap.
Buy Your First Home with help of the First Home Loan Deposit Scheme
If you’ve been finding it hard to save for a 20% deposit, then this is the perfect time to finally buy your dream home. With the First Home Loan Deposit Scheme , you can make your purchase immediately once approved. Just make sure to weigh the pros and cons of the scheme so you can make an informed decision whether its best for your current financial profile.