Since the initial announcement of the First Home Loan Deposit Scheme (FHLDS), there’s been first home buyers clambering to qualify and apply for it. The initial uptake was incredible, with all of the allocated 10,000 loans taken in the first 6 months or so. It didn’t stop there, and looks to only be growing in popularity and breadth thanks to the recent announcement in the Federal Budget for 20-21.
The Government has now updated First Home Loan Deposit Scheme to include an additional 10,000 allocations for applicants while also lifting the “caps” on how much can be spent nation wide, but more on that later.
With all the hype it’s almost impossible to imagine that 85% of first home buyers have never heard of the First Home Loan Deposit Scheme, so in case you’re one of the 85% (and even if you’re not) let’s recap what the FHLDS actually is and cover some of the changes from this year…
Usually first home buyers with less than a 20 percent deposit need to pay lenders mortgage insurance (LMI). That cost varies depending on your loan size and the amount of deposit you do have. However, under the Scheme, eligible first home buyers can purchase a modest home with a deposit of as little as 5 per cent (lenders criteria also apply) and avoid paying LMI. This is because NHFIC (National Housing Finance Investment Corporation) guarantees to a participating lender up to 15 percent of the value of the property purchased that is financed by an eligible first home buyer’s home loan.
Simply, 5 per cent deposit = no LMI.
OK, there’s three key terms in the above paragraph we need to unpack.
Firstly, “Lenders Mortgage Insurance” is a one-off payment that essentially protects the lender – which is a bit of a paradox, like, if you can’t raise the 20 percent for a deposit on your home loan the last thing you need, really, is another payment to make. So, this is the Government basically saying “We’ve got your back on this”.
Second term to look at here is the term “modest home” – If you’re a first home buyer with enough capital to buy a ritzy abode, that’s awesome, but this scheme isn’t designed for you. Rather it’s designed for individuals or couples who are “Eligible First Home Buyers” looking to get started on the hard-won dream of home ownership with a house that’s affordable and, yep, ‘modest’.
But, the modesty of that home has undergone a bit of an overhaul… Initially the schemes caps were much lower, where for example in Southeast Qld you were capped at spending $475,000 on house and land. The new Federal Budget announcement saw that cap raised to $650,000 with similar stories in other parts of the country. Modest is a matter of opinion, but that kind of money will make a big difference to size and location of almost any home.
(See the bottom of this article for a link to the nationwide caps in place for the FHLDS.)
And thirdly, the old chestnut, “Eligible First Home Buyers” – key word here is “Eligible”. As you’d expect, there’s some thoroughly thought-out conditions around who can jump on this train. There’s an income test (if you earn over 125K a year as an individual or 200K as a couple, you’re not eligible); a prior property ownership test, minimum age test (18 and over please!); deposit and owner-occupier requirement (ahhh, no investment properties).
Basically, this scheme is a well-designed, robust, heart-in-the-right-place effort by the NHFIC, aimed squarely at supporting Australians looking to commit to home ownership for the first time. There’s plenty of participating lenders, and on top of the 10,000 places in the scheme offered annually, the government have allowed for 10,000 more (keep in mind though, that of the 10,000 offered from Jan-June this year, ALL were taken so don’t delay if you’re on the fence!).
As any home owner knows, it’s not a commitment you take lightly, so we applaud programs like this that help the right people out, for all the right reasons.
If you think you’re in the ballpark of the First Home Loan Deposit Scheme, give us a call or send us an email – our mortgage specialists are completely up to date with all eligibility criteria and have multiple lender options we can discuss to find the one that best suits your goals and circumstances. Speaking to us about your first home costs you nothing and by not going straight to a bank you could literally save thousands of dollars or years off your mortage.
For a little extra detail before you hit the call button, check out this link: https://www.nhfic.gov.au/what-we-do/fhlds/eligibility/ It provides heaps of detail around your eligibility, property price thresholds, and more.
Ok, the ball is in your court. Now, pass it to us so your @Finance Mortgage Specialist can take care of the rest – call 1300 469 840 or send us an email; https://www.at-finance.com.au/contact-us/