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The First Home Loan Deposit Scheme (FHLDS) is a government measure designed to help people enter the property market for the first time.
Usually, Australian home buyers have to either save up a deposit of at least 20% of their property’s value, or take out Lender’s Mortgage Insurance – which can often cost thousands of dollars.
Under this new scheme, the Australian Government will guarantee 10,000 low-deposit loans a year, for eligible low- and middle-income earners who have saved up a deposit of as little as 5% of a property’s value.
Latest update: An extra lot of 10,000 scheme places, exclusively for new homes unlike previous rounds of the scheme, was announced in the 2020-21 Federal Budget.
Applications opened for this latest round with 20 of the selected lenders on 3 November, 2020, with the other seven lenders opening applications from 9 November, 2020. Find out more about the FHLDS for new homes.
As well as the purchase price of the property, factors such as your income 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 meet all of the following criteria, according to the NHFIC:
Australian citizens who are at least 18 years old.
Singles with a taxable income of up to $125,000 per year or couples with a combined 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 the Scheme.
Applicants must have a deposit of at least 5% – but less than 20% – of the property’s value.
Loans under the Scheme normally require scheduled repayments of the principal (as well as the interest) of the loan for the full period of the home loan contract. However, if the loan relates to the purchase of vacant land to build a house on, it may be eligible even if the terms of the loan agreement permit interest-only repayments for a specified period.
Loans are only eligible for the scheme if they’re for the purchase of a ‘residential property’ for owner-occupiers. The NHFIC recommends asking your lender if you’re in doubt as to whether the property you’re buying is considered residential.
Applicants must intend to move into and live in the property as their principal place of residence, typically within six months of settlement (so they must be owner-occupiers, not investors). They must also continue to live in the property for as long as their loan “has a guarantee under the Scheme”.
Applicants must be first home buyers who have not previously owned or had an interest in a residential property anywhere in Australia, 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).
The NHFIC has also provided more detailed information on its eligibility checker webpage, including additional criteria, relevant dates and requirements for different property types.
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.
Step 1: Check
Step 2: Research
Step 3: Reserve
Step 4: Apply
Step 5: Buy
Step 6: Settle
Step 7: Move in~
~There may be extra conditions under the FHLDS (New Homes) program. Check with your lender.
It is important to note that in most cases, scheme applicants must be living in their home six months after their loan settles (or a certificate of occupancy is issued). If this does not happen, the NHFIC states that the home loan would no longer be covered by the scheme. This could mean your lender may require you to pay fees and charges, and/or take out LMI.
Source: First Home Loan Deposit Scheme information booklet, NHFIC website
In addition to the spots already released under the FHLDS, the Federal Government has released an extension to the scheme specifically targeted at first home buyers who want to build a new house, buy a recently-built house or buy an “off the plan” home. Buying land and having a separate contract to build a new home is also an option.
The cut-off date for applications is 30 June, 2021.
According to the NHFIC, to be eligible for this latest round, applicants must:
The NHFIC states that first home buyers who want to apply for the FHLDS (New Homes) grant can “build or purchase a new home”, which includes:
“Specific dates and requirements apply for the different property types,” the agency states.
What does a “newly constructed dwelling” mean?
The agency defines a “newly constructed dwelling” as “properties that completed construction on or after 1 January 2020”. Additionally, the dwelling must:
You must move into the property within six months of the settlement date.
The NHFIC states that “first home buyers looking to purchase a property to do their own substantial renovations or knock down rebuilds are not eligible for FHLDS (New Homes)”; however, those buyers may be eligible to apply for an “existing homes” scheme place.
What’s an “off-the-plan” dwelling?
The NHFIC states that an off-the-plan purchase is when a dwelling is purchased before it can be “legally occupied”, such as if it hasn’t finished being built yet.
To buy an off-the-plan home under the scheme, a first home buyer must:
What’s a “house and land package” dwelling?
A house and land package is where you have a purchase contract (for the land) and a building contract (for the house) with the same person or company.
To be eligible, first home buyers must:
Can you buy land, and have a separate contract to build a home?
Yes. The NHFIC states that “a land and separate contract to build home” type of FHLDS application is where:
To qualify, prior to the expiry of the pre-approval period, a buyer must:
What home loans qualify under the FHLDS (New Homes) grant?
The types of loans that are available to first home buyers for new homes are different to those that may be available to them if they were buying an existing home.
The NHFIC recommends discussing the particulars with a participating lender. The agency states: “These include that the home loan will need to:
The FHLDS can be combined with other first home buyer assistance available from the government.
This includes the recently announced HomeBuilder scheme for eligible Australians building a new home or undertaking major renovations to an existing home.
Another example is the First Home Owners Grant (FHOG), a national scheme administered locally in most states and territories, which provides financial incentives for people to build or buy brand new homes.
Stamp or transfer duty concessions could also apply to both new and existing homes.
These are the residential mortgage lenders participating in the First Home Loan Deposit Scheme, according to the NHFIC:
|Australian Military Bank|
|Bank of us|
|Community First Credit Union|
|Endeavour Mutual Bank and Sydney Mutual Bank (divisions of Australian Mutual Bank Ltd)|
|G&C Mutual Bank|
|Indigenous Business Australia|
|National Australia Bank|
|People’s Choice Credit Union|
|Police Bank (including subsidiaries Bank of Heritage Isle and Border Bank)|
|Queensland Country Credit Union|
|Community First Credit Union|
|Regional Australia Bank|
|Teachers Mutual Bank (inc. Firefighters Mutual Bank, Health Professionals Bank and UniBank)|
|The Mutual Bank|
|WAW Credit Union|
It could be a wise idea to seek professional financial advice.
The Australian Government says that the FHLDS “is only available for the purchase of a modest home” and so it has capped the price of the homes eligible under the scheme.
The caps are different depending on where you want to buy and if you want a new home or an existing home.
(also called the “Extended First Home Loan Deposit Scheme” and the “New Home Guarantee”)
|State or Territory||Capital city/ regional centre price cap ($AUD)||Rest of state price cap ($AUD)|
←Mobile users: swipe to view price caps→
|State or Territory||Capital city/regional centre price cap ($AUD)||Rest of state price cap ($AUD)|
|Jervis Bay Territory & Norfolk Island||$450,000|
|Christmas Island & Cocos (Keeling) Island||$300,000|
|Source: National Housing Finance and Investment Corporation|
The scheme’s website says that “capital city price caps will apply to large regional centres with a population over 250,000”, such as the Gold Coast, Newcastle and Lake Macquarie, the Sunshine Coast, Illawarra (including Wollongong) and Geelong. This is because “dwellings in large regional centres tend to be significantly more expensive than other regional areas”.
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.
Not all first home buyers will be able to access the First Home Loan Deposit Scheme. Places are limited by the government to a set number per year and once that allocation is exhausted, the scheme closes to new applicants. Anyone applying for the scheme also has to meet strict criteria, which include price caps on the homes they can buy or build, depending on their location, and income restrictions. Only a select range of banks are able to offer places in the scheme, too.
The National Housing Finance and Investment Corporation (NHFIC) – the government body administering the scheme – states that participating lenders in the FHLDS will not charge eligible customers higher interest rates than equivalent customers outside the scheme. However, it’s worth keeping in mind that taking out a home loan with a lower deposit would mean paying interest on a larger sum, potentially making it more expensive as a result.
While the First Home Owner’s Grant scheme typically only applies to new or newly built homes, under the FHLDS an eligible first home buyer could also purchase the following types of property, according to the NHFIC:
It’s worth noting that there are price limits that apply to homes under the FHLDS, which differ from region to region, and a list of eligibility requirements, too.
There could be risks to weigh up when applying for a home loan with a low deposit, including:
It may be a wise idea to seek independent advice before taking on any large financial commitment.
Getting ready to buy:
Buying a property:
Finance News - October 7th
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...– Read more
Calculations compare the time taken to save up a 5% deposit on a $400,000 property compared to a 20% deposit. They assume the borrower earns the average full-time ordinary time earnings per the ABS Average Weekly Earnings, May 2020 ($1,713.90 a week or $89,123 a year), pays income tax at the 2020-21 tax rates and pays the 2% Medicare Levy. They also assume the borrower deposits 20% of their monthly after-tax income into a bonus saver account with the average total rate of 0.79% (based on bonus savings accounts on Canstar’s database for an initial deposit of $10,000), with interest earnings taxed at the marginal tax rate of 32.5%.
2 SAVES: Source: Genworth LMI Premium Estimator – 9/12/2020.
Based on the estimated LMI premium payable on a 30-year, owner-occupier, first home buyer loan at 95% LVR on a property valued at $950,000, which is the maximum property price cap under the FHLDS (New Homes) scheme.
3 COSTS: Source: www.canstar.com.au – 9/12/2020.
Based on the interest costs over the life of a 30-year loan for a property valued at $400,000 with a 5% or 20% deposit. Calculations assume an interest rate based on the average of owner-occupier variable loans on Canstar’s database available at the time of writing for the particular loan amount and LVR, and for principal & interest repayments; includes first home buyer-only loans but excludes introductory loans.
4 ODDS: Source: www.canstar.com.au – 9/12/2020.
Based on the number of owner-occupier first home buyers in the FY19-20 financial year per ABS Lending Indicators statistics. The proportion of first home buyers who are constructing or purchasing a newly-built home is assumed to be consistent with the proportion of owner-occupiers doing the same. *To be eligible for the FHLDS (New Homes) scheme, first home buyers must be constructing or purchasing a newly-built home.
Amanda is the Digital Editor at Canstar, Australia’s biggest financial comparison site. A journalist for more than two decades, Amanda Horswill has covered a gamut of subjects, including property, lifestyle, hyper-local news, data journalism, the Arts and careers. She’s served as the Editor of Brisbane News, Deputy Features Editor for The Sunday Mail, Deputy Editor – Digital at Quest Community News, and a host of other senior positions at News Corp, prior to joining Canstar. Amanda is fascinated with the ever-changing world of finance. A passionate believer in the motto “knowledge is power”, she strives to translate the news into practical information that will help readers make informed decisions about their future. When not analysing the latest economic news, Amanda can be found pouring over local property listings, searching for her next renovation project. Follow her on Twitter or LinkedIn.