Who is eligible for the proposed First Home Loan Deposit Scheme?
What a weekend in lead up to the election.
We now have both major parties supporting a First Home Loan Deposit Scheme to help some first home buyers by removing the need for Lenders Mortgage Insurance (LMI).
The scheme doesn't remove borrowers need for a 5% deposit, but it can save thousands of dollars by not requiring paying for LMI premiums required to cover the shortfall to 20% deposit.
The scheme is not intended to change the lending criteria for 5% deposit borrowers.
The scheme would operate from January 2020.
So who is eligible?
There is not much detail other than there is $500m being pledged to help 10,000 first home buyers are a year. To be eligible single borrower must earn less than $125,000 per year borrower couples must earn less than $200,000 a year.
There will also be regional maximum property value criteria with the intention that the scheme is targeted at lower value properties. Based upon $500m being committed guarantee up to 15% of the property values of 10,000 first home buyers, this means eligible properties would be valued at $333,000 on average and save $10,000 in LMI premiums on average.
Based upon LoanCaddie's statistics of First Home Buyers and their targeted property purchases, at most 22% of first home buyers could be eligible for the scheme.
Should I wait?
Waiting for the scheme to be operational could save you money by not having to pay LMI. However, just like every previous first home buyer government incentive, it will also mean that other First Home Buyers will also be able to buy which will force prices of eligible properties higher. There is also no certainty that the proposal would pass both houses of parliament.