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

The First Home Loan Deposit Scheme has been extended from 6 October, 2020, allowing some first home buyers to buy a new house with just a 5% deposit and not pay mortgage insurance fees. But how much might 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) has been extended, with an extra 10,000 places open from 6 October, 2020. This special additional round of the FHLDS is also being referred to as the ‘New Home Guarantee’ or NHG. The new spots will come with higher property price caps, but the Government has said that unlike earlier rounds of the scheme, these places will only be available for new home purchases.

The FHLDS is designed to help some low- and middle-income earners with a deposit of as little as 5% of a property’s value secure a home loan without having to pay Lender’s Mortgage Insurance, due to the Federal Government partially guaranteeing the loan.  This could save some buyers tens of thousands of dollars in insurance premiums over the life of their loan, although it could also lead to higher interest costs over the life of the loan than if a borrower had managed to save up a higher deposit.

The scheme was first launched on 1 January with all the 10,000 places on offer for new and existing homes snapped up by eager home-owner hopefuls after just four months. Another 10,000 places were released in a second-round offering from 1 July but were again quickly exhausted.

The additional places under the NHG – for a total of 30,000 provided under the FHLDS so far – will be available until 30 June, 2021.

Applicants must meet a set of criteria to be eligible for the scheme (including this extension of it), such as having to earn below 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, as well as for new or existing home purchases, (although bear in mind that existing homes are off the table for this latest set of scheme places). The price caps allow applicants to work out how much they might need to save up for a deposit, and we do some of the numbers for you below.

What’s my budget and how much of a deposit do I need for the new price caps?

The below tables show the maximum property purchase price that would apply in different areas under both the extended FHLDS (the NHG), which only allows for purchasing or building new homes, and the previous rounds of the FHLDS, where other types of homes were also permitted. We used the prices to determine how much of a deposit may be required in your location under the extended scheme.

The scheme allows participants to purchase a new or newly-built dwelling with a deposit of at least 5% of the property’s value, with the Government guaranteeing up to 15%.

For instance, to live in Sydney you could now buy a new property priced up to $950,000, which was previously capped at $700,000 for new and existing properties. We crunched the numbers and found you would need a minimum $47,500 deposit for a property priced at the new, higher cap.

The lowest deposit amount required to save for a property priced at the cap under the NHG is $20,000, which applies to non-capital city parts of South Australia, Western Australia and Tasmania.

Price caps and deposit requirements for the extended First Home Loan Deposit Scheme (also known as the New Home Guarantee)

State/Territory Location in State/Territory Price cap ($AUD) Minimum deposit required (5% of property’s value)^
NSW Capital city (Sydney) and regional centres (Newcastle, Lake Macquarie and Illawarra) $950,000 $47,500
Rest of state $600,000 $30,000
VIC Capital city (Melbourne) and regional centre (Geelong) $850,000 $42,500
Rest of state $550,000 $27,500
QLD Capital city (Brisbane) and regional centres (Gold Coast and Sunshine Coast) $650,000 $32,500
Rest of state $500,000 $25,000
WA Capital city (Perth) $550,000 $27,500
Rest of state $400,000 $20,000
SA Capital city (Adelaide) $550,000 $27,500
Rest of state $400,000 $20,000
TAS Capital city (Hobart) $550,000 $27,500
Rest of state $400,000 $20,000
ACT Capital city (Canberra) $600,000 $30,000
NT Capital city (Darwin) $550,000 $27,500
Current as at 6/10/2020 – Price caps sourced from Minister for Housing and Assistant Treasurer. ^Minimum deposit amounts calculated by Canstar, assuming buyers purchase a home valued at the maximum property price cap in their state or territory.

Price caps and deposit requirements for the original First Home Loan Deposit Scheme (rounds that started 1 January and 1 July, 2020)

State/Territory Location in State/Territory Price cap ($AUD) Minimum deposit required (5% of property’s value)^
NSW Capital city (Sydney) and regional centres (Newcastle, Lake Macquarie and Illawarra) $700,000 $35,000
Rest of state $450,000 $22,500
VIC Capital city (Melbourne) and regional centre (Geelong) $600,000 $30,000
Rest of state $375,000 $18,750
QLD Capital city (Brisbane) and regional centres (Gold Coast and Sunshine Coast) $475,000 $23,750
Rest of state $400,000 $20,000
WA Capital city (Perth) $400,000 $20,000
Rest of state $300,000 $15,000
SA Capital city (Adelaide) $400,000 $20,000
Rest of state $250,000 $12,500
TAS Capital city (Hobart) $400,000 $20,000
Rest of state $300,000 $15,000
ACT Capital city (Canberra) and regional centres $500,000 $25,000
NT Capital city (Darwin) and regional centres $375,000 $18,750
Jervis Bay Territory & Norfolk Island All locations $450,000 $22,500
Christmas Island & Cocos (Keeling) Island All locations $300,000 $15,000
Current as at 1/07/2020 – Price caps sourced from nhfic.gov.au. ^Minimum deposit amounts calculated by Canstar, assuming buyers purchase a property valued at the maximum property price cap in their location. 

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 are eligible 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 one 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 be eligible for a place in 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 generally require scheduled repayments of the principal and interest of the loan for the full period of the home loan contract, with some exceptions for people building a new home.
  • 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).

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

According to the Australian Government, an eligible first home buyer can build a new dwelling or purchase a newly-built dwelling under the extended scheme (the NHG) that started on 6 October, 2020. The following types of property were considered under the original scheme rounds that started in January and July:

  • 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 some of 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 for the original FHLDS are listed below in alphabetical order. The National Housing Finance and Investment Corporation (NHFIC), which administers the FHLDS, is yet to confirm the participating lenders for the NHG, although it said on its website that it was “currently working with” the existing panel of FHLDS lenders on implementing it.

  • 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 and Sydney Mutual Bank (divisions of Australian Mutual Bank Ltd)
  • G&C Mutual Bank
  • Gateway Bank
  • Indigenous Business Australia
  • Mortgageport
  • MyState Bank
  • National Australia Bank
  • People’s Choice Credit Union
  • Police Bank (including Border Bank and Bank of Heritage Isle)
  • P&N Bank
  • QBANK
  • Queensland Country Bank
  • Regional Australia Bank
  • Teachers Mutual Bank (including Firefighters Mutual Bank, Health Professionals Bank and UniBank)
  • The Mutual Bank
  • WAW Credit Union

What other first home buyer assistance is available?

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

  • the 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) in their state or territory
  • stamp or transfer duty concessions.

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.

 

This article was reviewed by our Sub-editor Tom Letts before it was published as part of our fact-checking process.

About Ellie McLachlan

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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