7th October 2020

First Home Loan Deposit Scheme

The Federal Government has announced the extension of the First Home Loan Deposit Scheme to assist more people to enter the property market for the first time.

But it can be a bit confusing when you’re new to the property market so here is a guide to help you build your first home

What is it?

The First Home Loan Deposit Scheme (FHLDS) is a government measure designed to help people enter the property market for the first time.

Usually, Australian home buyers must either save up a deposit of at least 20% of their property’s value or take out Lender’s Mortgage Insurance (LMI) – which can often cost thousands of dollars.

Under this scheme, the Australian Government will guarantee low-deposit loans, for eligible low- and middle-income earners, who have saved up a deposit of 5% of a property’s value.

The extension will allow for up to 10,000 extra grants until June 30th 2021.

How does it work?

The scheme helps first-home buyers avoid paying Lender’s Mortgage Insurance (LMI), with a deposit as low as 5%.

LMI is an insurance policy that the lender takes out to cover the risk if the borrower can’t afford to meet their home loan repayments.

Generally, a lender will require you to pay for LMI if your home loan deposit is less than 20% of the total value of your property.

Under the FHLDS, the government guarantees the shortfall needed to reach the 20% home loan deposit threshold normally required, which the government says could save you around $10,000!

What it could mean for approved applicants

Cuts around 4 years & 3 months off the time it takes to save for a deposit on a $400,000 property[i]. Can get you into your new home 4 years sooner!

Saves up to $30,000 in Lender’s Mortgage Insurance Premiums [i]

Who is eligible?

  • Australian citizens at least 18 years of age. Permanent Residents ARE NOT eligible
  • Single with a taxable income up to $125,000 from previous financial year and couples with a taxable income of up to $250,000 from previous financial year.
  • Must have 5% of the value of an eligible property saved
  • Must be an owner-occupier of the intended property
  • Applicant’s must be first-home buyers who have not previously owned, or had an interest in, a property in Australia.

Can the FHLDS be combined with other government incentives?

The FHLDS can be combined with other first home buyer assistance available from the government.

This includes the recently announced HomeBuilder scheme for eligible Australians building a new home.

Another example is the First Home Owners Grant (FHOG), a national scheme administered locally in most states and territories, which provides financial incentives for people to build or buy brand new homes.

What lenders can give loans under the FHLDS?

The list of participating lenders can be found here: https://www.nhfic.gov.au/what-we-do/fhlds/how-to-apply/#FHLDSlenders

How much can I spend on a house under the FHLDS?

The price cap for metropolitan Melbourne and regional centres is $850,000

  How do I apply for the FHLDS?

Eligible first home buyers can apply for the scheme through a participating lender. To find out more about the application process, visit the National Housing Finance and Investment Corporation website at www.nhfic.gov.au

[i] Source: Canstar.com.au December 2019