There’s nothing quite as exciting as receiving a shiny set of keys to your very own home. The thrill of knowing it’s all yours. The freedom to be able to do what you like with it. Nothing compares!
If you’re an aspiring first home buyer, the new First Home Loan Deposit Scheme may help you reach your homeownership goal sooner. Here’s what you need to know.
Exciting news for first home buyers!
On the 1st January 2020, the Australian Government launched the First Home Loan Deposit Scheme. It provides a guarantee allowing eligible first home buyers on low and middle incomes to buy a home with a deposit of as little as 5 per cent (subject to their lender’s criteria).
Potential applicants can choose from a panel of participating lenders, which includes major banks and smaller lenders.
How many people can access the Scheme?
The scheme is capped at 10,000 places this financial year. A further 10,000 places will become available from July 2020.
In January, lenders registered 3,000 potential first home buyers under the Scheme. From the 1st February 2020, 7,000 additional places became available.
Who is eligible?
Key eligibility criteria include:
An income test (your taxable income for the previous financial year must not exceed $125,000 for singles or $200,000 combined for couples)
You must not have owned a property previously
You must be an Australian citizen
You must be aged 18 or over
You must have a 5 per cent deposit saved (if applicants have 20 per cent or more saved, they will not be eligible)
You must intend to live in the property (and move in within 6 months of the date of settlement or, if later, the date an occupancy certificate is issued).
You must continue to live there for as long as your home loan has a guarantee under the Scheme.
You can check whether you’re eligible using this handy online tool.
You can also find further information about eligibility here, or better yet, speak to us and we’ll run through the eligibility requirements with you.
Property requirements
To be eligible, the property you intend to buy must also meet certain requirements. For example, it must:
Be a residential property (as defined under the Scheme)
Have a sale price under the price cap for the location (for example in Melbourne the price cap is $600,000, while in Sydney it’s $700,000). You can find more details about the price cap values here.
Be bought by an eligible first home buyer under the Scheme, who at settlement date will be the sole registered owner/s of the property.
Be an established dwelling or a new-build dwelling purchased under a house and land package, a land and separate contract to build a home or an ‘off-the-plan’ arrangement that is financed under an eligible loan from a participating lender.
You can find further information about property requirements here.
Are all home loans eligible?
No. There are certain rules about the type of home loan which can be accessed under the Scheme.
For example, you must take out a principal and interest loan (exceptions may be granted to borrowers constructing a new dwelling) with a term of 30 years or less (with no changes to loan terms). You must use all of the proceeds for the purchase (or towards the purchase and improvement) or construction of the eligible property, and your loan commitment must not be less than 80 per cent of the value of the property, nor more than 95 per cent.
Talk to us about your plans and we’ll explain the home loan requirements.
Next steps
If you’d like to find out more about the First Home Loan Deposit Scheme and other incentives available to you, please reach out. We can walk you through the eligibility requirements and lodge your application with a participating lender on your behalf.
Remember, now is a great time to buy a property. Housing affordability has improved in many markets, some lenders have dropped their mortgage rates and home loan servicing rules have relaxed.
Further reading:
$1 Lenders Mortgage Insurance (LMI) for First Home Buyers