The introduction of the first home loan deposit scheme (FHLDS) at the beginning of 2020 seems to be successful, with all spots for the 2019/20 financial year now being reserved. To continue to assist first home buyers get into the property market sooner, the Australian government has agreed to release an additional 10,000 spots from the 1st of July, 2020.
So, how does it work?
The FHLDS is a government-implemented scheme that aims to reduce the deposit required to buy a house. Usually, when buying a house, lenders will want you to have a deposit of 20% of the property value otherwise you will be charged Lenders Mortgage Insurance (LMI), a one time fee paid to protect the bank in case you default on your loan.
With the FHLDS, the government guarantees up to 15% of the value of the propert, so first homebuyers under the scheme do not have to pay lenders mortgage insurance. This can save first homebuyers thousands of dollars in Lenders Mortgage Insurance.
|Without FHLDS||With FHLDS|
|Lenders Mortgage Insurance||$14,000*||–|
|Fees & Costs||$5,000 – $10,000||$5,000 – $10,000|
|Total Paid||$44,000 – $49,000||$30,000 – $35,000|
Table 1: Comparison between using the FHLDS and not using the FHLDS on a $500,000 home.
*This LMI Premium is an estimate only.
Who is Eligible?
In order to be eligible for the FHLDS, you must:
- Be a genuine first home buyer
- Be an Australian Citizen
- Be 18 years of age or older
- Have a minimum of 5% of the property value saved
- Have your previous financial year income (2019-20 financial year) be under $125,000 for singles and under $200,000 for couples.
What properties can I buy?
The FHLDS is a scheme to allow first home buyers to purchase a modest home sooner, therefore like all other First Home Buyer assistant schemes, it will only be eligible if you are buying a house to live in. Furthermore, the type of property is limited to the following:
- An existing house, townhouse or apartment
- A house and land package
- An off-the-plan apartment or townhouse
- Land with a separate contract to build a home
Furthermore, the property you must be under the price cap. This varies from town to town ranging between $450,000 to $700,000 in NSW. More information regarding the property price cap’s can be found here.
If you are thinking that this is the year for you to get into the property market the FHLDS may be what assists you with getting in that much sooner. Talk to the team at Crest Mortgages & Finance today for complementary lending advice, to ensure that you are getting the loan that suits your needs.