New Year’s Day 2020 marks the start of a new initiative – the First Home Loan Deposit Scheme (FHLDS). It’s designed to help first home buyers with a small deposit get into a place of their own sooner, and it could be the key for you to become a home owner in 2020. Here’s what you need to know.
How the Scheme works
The FHLDS is an Australian Government initiative to support eligible first home buyers purchase a home with a small deposit (as little as just 5%) to get into the market sooner. The Scheme doesn’t provide a cash payment. Instead, the government guarantees up to 15% of your home loan. This allows you to offset the cost of lenders mortgage insurance (LMI), which normally applies if your deposit is below 20%. This can be a saving worth up to $10,000. FHLDS is limited to 10,000 applicants each financial year.
Are you eligible for the FHLDS?
To be eligible for FHLDS, you need to meet a few conditions.
- Be aged over 18
- Be an Australian citizen (permanent residents are not eligible)
- Have not previously owned property (this includes any investment properties)
- Earn taxable income below $125,000 annually if you’re single, or have a combined income up to $200,000 if you’re buying as a married or de facto couple (you won’t be eligible for the Scheme if you are co-buying with friends or relatives)
- Have a deposit between 5 and 20 per cent of the property’s value
- Plan to live in the home you buy (investment properties are not eligible)
- Loans require scheduled repayments of the principal of the loan for the full period of the agreement (exception applies when the loan is for vacant land or the construction of a new home, which allows you to make interest-only payments for a set period)
Property price thresholds apply
The FHLDS can be used to purchase a house, apartment, townhouse, or land and construction package. It’s also available if you choose to purchase off the plan. However, limits apply to the value of the home you can buy with the help of the Scheme. These are shown in the table below. Capital city values apply to regional centres that have populations over 250,000. These include the Gold Coast and Sunshine Coast in Queensland, Newcastle, Lake Macquarie, and Wollongong in NSW, and Geelong in Victoria.
State, Territory or Region
Property price cap
|NSW - capital city and regional centers (Newcastle, Lake Macquarie, and Illawarra)||$700,000|
|NSW - other||$450,000|
|VIC – capital city and regional center (Geelong)||$600,000|
|VIC - other||$375,000|
|QLD - capital city and regional centers (Gold Coast, and Sunshine Coast)||$475,000|
|QLD – other||$400,000|
|WA – capital city||$400,000|
|WA - other||$300,000|
|SA - capital city||$400,000|
|SA – other||$250,000|
|TAS – capital city||$400,000|
|TAS – other||$300,000|
|Jervis Bay Territory and Norfolk Island||$450,000|
|Christmas Island and Cocos (Keeling) Islands||$300,000|
Which lenders offer the FHLDS?
NHFIC has appointed 27 lenders to offer guarantees under the Scheme, which commenced January 2020.
All participating lenders have agreed not to charge a higher home loan interest rate to first home buyers supported by the Scheme.
Interested, but missed out?
Demand has been strong to secure a position so, if you missed out on the initial January release, the positive news is that some lenders with access to the Scheme opened additional applications on 1 February 2020 and a new allocation of 10,000 positions is expected to be available from July 2020.
What about the First Home Owner Grant?
FHLDS compliments the First Home Owner Grant and any stamp duty discounts that may be available in your state or territory. So you don’t have to give up other first home buyer benefits when you apply for the FHLDS.
Get a head start - how your Aussie broker can help
We expect the next round of positions to fill up fast. So, it’s a good idea to get a head start and be prepared before the next allocation opens July 2020.
Your Aussie Broker is a home loan expert who can answer any questions you may have about the home buying process, how the FHLDS works, provide useful hints and tips on what you can do to help get your loan application over the line, tips on how to grow a 5% deposit and what other options are available if you don’t fit the eligibility criteria.
If you’re planning to buy you first home in 2020, go straight to Aussie for the support you need to make it happen.