First Home Loan Deposit Scheme

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What is the First Home Loan Deposit Scheme?

The First Home Loan Deposit Scheme is a new Australian Government initiative to help eligible first home buyers get into the property market sooner.

The Scheme does this by providing a guarantee that allows First Home Buyers to purchase a home with a deposit as little as 5%, without the requirement to pay for lenders mortgage insurance (LMI).

Usually, first home buyers have to either save up a deposit of at least 20%, or pay LMI (which can cost thousands of dollars!).

When does the First Home Loan Deposit Scheme begin?

The Scheme commenced on the 1st January 2020 and will support up to 10,000 loans per financial year.

What type of property can be bought under the Scheme?

The property must be ‘residential’. Eligible residential properties include

  • 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 of townhouse

Are you eligible for the Scheme?

To be eligible for the Scheme, you must meet the following criteria:

  • Australian citizen and at least 18 years of age
  • Have a taxable income of up to $125,000 per year (single) or $200,000 (couple)
  • Only those who are married or in a de-facto relationship count as a couple (no siblings, parent and child, etc.)
  • Have a deposit of at least 5%, but no more than 20%
  • Intend to move into and live in the property as your principal place of residence, typically within six months of settlement (owner-occupiers, not investors). They must also continue to live in the property for as long as their loan “has a guarantee under the Scheme”
  • Must be a first home buyer who has not previously owned or had an interest in a residential property, either on their own or jointly with someone else.

How much can you spend on a home under the Scheme?

The Scheme intends to only be available to purchase a ‘modest home’ and so price caps do apply and these caps differ depending on your location.

RegionPrice Cap ($AUD)
NSW – Sydney and regional centres$700,000
NSW – Other$450,000
VIC – Melbourne and regional centres$600,000
VIC – Other$375,000
QLD – Brisbane and regional centres$475,000
QLD – Other$400,000
WA – Perth$400,000
WA – Other$300,000
SA – Adelaide$400,000
SA – Other$250,000
TAS – Hobart$400,000
TAS – Other$300,000
ACT$500,000
NT$375,000

Important things to consider before taking up the Scheme

There are risks which need to be weighed up prior to applying for a home loan with a smaller deposit such as:

  • A smaller deposit may mean you take on more debt than you can afford and financially overcommit.
  • While you are able to potentially purchase a home much earlier, you are borrowing more money and therefore you could pay significantly more interest over the life of the loan.
  • Having a lower amount of equity in your home could make it difficult to refinance to a new lender in the short term
  • If home prices fall, as you have less equity in the home, you are at greater risk of going into negative equity. This means you owe more than your home is actually worth.
  • A smaller deposit may limit the lenders and loans you are eligible for and you could miss out on some of the more competitive rates available to borrowers with larger deposits

For further information on the Scheme and details on how to apply, please visit https://www.nhfic.gov.au/what-we-do/fhlds/

IMPORTANT: The guarantee is not a cash payment or a deposit for your home loan

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