Your place for buying and building
7th October 2020
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?
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