Want to apply for the First Home Loan Deposit Scheme? Here's how much you may need to save

A new round of the First Home Loan Deposit Scheme launches on 1 July, 2020, which allows some people to buy a house with just 5% deposit and not pay mortgage insurance fees. But how much will you need to save up to buy an eligible home under the scheme in your preferred location? We take a look.
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The First Home Loan Deposit Scheme (FHLDS) is a government guarantee which will secure the mortgages of some low- and middle-income earners with a deposit of as little as 5% of a property’s value without having to pay Lender’s Mortgage Insurance. This could save some buyers tens of thousands of dollars in insurance premiums over the life of their loan.  Administered by the National Housing Finance and Investment Corporation, it was first launched on 1 January, 2020 with all the 10,000 places on offer reserved by eager home-owner hopefuls after just four months. Another 10,000 places will be made available from 1 July, 2020.

Applicants must meet a set of criteria to be eligible for the scheme, such as having to earn a certain amount of money. Conditions apply, too, to the type of properties that can be bought under the scheme – there are different property price caps for capital cities, larger regional centres and regional areas. This allows potential applicants to work out how much they might need to save up for a deposit (we do the numbers for you below).

First home buyers applying for the scheme could also be eligible for other grants and assistance from the government, such as:

  • HomeBuilder grant for people building a new home or undertaking significant renovations, which is an economic stimulus initiative launched in the wake of COVID-19,
  • the First Home Owners Grant (FHOG),
  • Stamp or transfer duty concessions.

First up, will I be eligible for the First Home Loan Deposit Scheme?

Factors such as your income and relationship status could determine whether or not you would be able to secure a government guarantee on your home loan under the FHLDS. Here are some quick facts about who may be able to qualify, if they met all of the following criteria, according to the Australian Government:

  • Australian citizens who are least 18 years old.
  • Singles with a taxable income of up to $125,000 per year and couples with taxable income of up to $200,000 per year (incomes would be assessed for the financial year preceding the financial year in which the loan is entered into).
  • Couples are only eligible for the scheme if they are married or in a de-facto relationship. So other people such as siblings, a parent and child or two friends buying together would not eligible for the Scheme.
  • Applicants must have a deposit of at least 5% – but no more than 20% – of the property’s value.
  • Loans under the Scheme require scheduled repayments of the principal (excluding interest) of the loan for the full period of the home loan contract.
  • Applicants must intend to move into and live in the property as their principal place of residence (so they must be owner-occupiers, not investors).
  • Applicants must be first home buyers who have not previously owned or had an interest in a residential property, either on their own or jointly with someone else (this includes body corporate and company-owned properties, regardless of whether it was an investment or owner-occupied property and whether it was ever lived in).

Okay, so what’s my budget and how much of a deposit do I need?

The below table shows the maximum property purchase price that would apply in different areas under the FHLDS, as well as how much deposit is required.

For instance, to live in Sydney you could buy an existing property priced up to $700,000. We crunched the numbers and found you would need a minimum $35,000 deposit for that price, up to a maximum of $140,000.

The lowest deposit amount required to save is $12,500, which applies to “other” parts of South Australia (not in the capital city of Adelaide where it is more expensive).

Property Price Thresholds for First Home Loan Deposit Scheme
Region Price Cap ($AUD) Deposit required (5-20% of property’s value)
NSW – capital city and regional centres (Sydney, Newcastle, Lake Macquarie and Illawarra) $700,000 $35,000 – $140,000
NSW – other $450,000 $22,500 – $90,000
VIC – capital city and regional centre (Melbourne and Geelong) $600,000 $30,000 – $120,000
VIC – other $375,000 $18,750 – $75,000
QLD – capital city and regional centres (Brisbane, Gold Coast and Sunshine Coast) $475,000 $23,750 – $95,000
QLD – other $400,000 $20,000 – $80,000
WA – capital city (Perth) $400,000 $20,000 – $80,000
WA – other $300,000 $15,000 – $60,000
SA – capital city (Adelaide) $400,000 $20,000 – $80,000
SA – other $250,000 $12,500 – $50,000
TAS – capital city (Hobart) $400,000 $20,000 – $80,000
TAS – other $300,000 $15,000 – $60,000
ACT $500,000 $25,000 – $100,000
Northern Territory $375,000 $18,750 – $75,000
Jervis Bay Territory & Norfolk Island $450,000 $22,500 – $90,000
Christmas Island & Cocos (Keeling) Island $300,000 $15,000 – $60,000
Source: nhfic.gov.au, December 2019.

What types of property can I buy under the First Home Loan Deposit Scheme?

According to the Australian Government, an eligible first home buyer could purchase the following types of property under the scheme:

  • An existing house, townhouse or apartment
  • A house and land package
  • Land together with a separate contract to build a home
  • An off-the-plan apartment or townhouse

What are the risks involved in getting a low deposit home loan?

The FHLDS could help some Australians get a leg up on the property ladder who may have otherwise struggled to do so. But there could also be a few risks to weigh up when applying for a home loan with a low deposit, including:

  • A lower deposit means the borrower could be taking on more debt and may end up paying more in interest as a result.
  • A lower amount of equity in your home from the start could make it difficult to refinance to a new home loan or switch to a new lender in the short term, particularly if house prices fall.
  • A lower deposit may limit the lenders and loans you are eligible for and you could miss out on some of the more competitive rates available to borrowers with a lower loan-to-value ratio (LVR).

I think I’m eligible – how do I apply?

Applications for the FHLDS can be submitted to participating lenders and their brokers (not the government). Participating lenders are (in alphabetical order):

  • Australian Military Bank
  • Auswide Bank
  • Bank Australia
  • Bank First
  • Bank of us
  • Bendigo Bank
  • Beyond Bank
  • Commonwealth Bank
  • Community First Credit Union
  • CUA
  • Defence Bank
  • Endeavour Mutual Bank
  • G&C Mutual Bank
  • Gateway Bank
  • Indigenous Business Australia
  • Mortgageport
  • MyState Bank
  • National Australia Bank
  • People’s Choice Credit Union
  • Police Bank
  • P&N Bank
  • QBANK
  • Queensland Country Bank
  • Regional Australia Bank
  • Sydney Mutual Bank
  • Teachers Mutual Bank (inc. Firefighters Mutual Bank, Health Professionals Bank and UniBank)
  • The Mutual Bank
  • WAW Credit Union

Don’t think you’ll qualify? There are other options that could be available to you. It could pay to compare.

* Lenders may not be on the FHLDS participating lenders list. Note: Keep in mind that you will typically also need to meet the lending criteria of the bank you apply to.

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Ellie McLachlanEllie McLachlan is a Senior Finance Journalist within the Editorial team at Canstar, responsible for leading the news function for the business. She specialises in covering all things home loans and housing, breaking finance industry news and monitoring financial product movements. Ellie has a keen interest in analysing data and research, and is passionate about sharing people’s personal experiences with managing money. Ellie studied a Bachelor of Journalism and Arts (Peace and Conflict Studies) at UQ and has dipped her toe in digital, broadcast and print media, including at organisations such as The Urban List, The Courier Mail, 4ZZZ and APN News & Media. Follow her on Twitter and LinkedIn.

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