First Home Loan Deposit Scheme

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: Places are still available.
An extra lot of 10,000 scheme places, exclusively for new homes, was announced in the 2021 Federal Budget.
On 1 July, 2021, another 10,000 FHLDS places (for new and existing homes) were made available for the 2021/22 financial year.

The First Home Loan Deposit Scheme & Lender’s Mortgage Insurance: How it works


At least 20% deposit: No LMI required


Less than 20% deposit: LMI may be required


A deposit of at least 5% but less than 20% and approved for FHLDS: No LMI required*

*Eligibility requirements apply. Check with your lender

First Home Loan Deposit Scheme: What it could mean for approved applicants


FHLDS Cuts
FHLDS Saves
FHLDS Costs

Here's how we worked this out

Source: Canstar.com.au, December 2019

Latest updates: First Home Loan Deposit Scheme

» Is the First Home Loan Deposit Scheme still available?

Yes, there are still places available in the First Home Loan Deposit Scheme for both new and existing homes (through participating lenders). As detailed below, there were extra places added to the schemes – and an entirely new scheme launched – by the government in recent months. There is a cap placed on the number of places certain lenders are able to offer, so it could be a wise idea to shop around and find out which eligible lenders still have places available to reserve.


» Single parents: Can I buy a house with a deposit of 2%?

12 May, 2021: In the 2021 Federal Budget, the government announced a new type of scheme, called the Family Home Guarantee. This separate scheme offers to guarantee the loans of single parents (with dependants) who want to build or buy a home with a deposit of 2% (subject to the individual’s ability to service a home loan), the National Housing Finance and Investment Corporation (NHFIC) states. The single parent does not have to be a first home buyer, but does need to meet other eligibility criteria.

Learn more: What is the Family Home Guarantee?


» More places promised in FHLDS (New Homes)

12 May, 2021: The Australian Government has pledged, in the 2021 Federal Budget, to provide an additional 10,000 First Home Loan Deposit Scheme (New Homes) spots for the 2020/21 financial year. The new places are for eligible first home buyers building or purchasing new homes. This is in addition to the 10,000 spots available for the purchase of new and existing homes under the scheme.

The NHFIC, which administers the scheme, states that “eligible first home buyers can use the FHLDS (New Homes) guarantee in conjunction with other government programs like the First Home Super Saver Scheme, HomeBuilder grant or state and territory First Home Owner Grants and stamp duty concessions”.

“The guarantee is not a cash payment or a deposit for your home loan,” the NHFIC states.


» New places in the First Home Loan Deposit Scheme

10 February, 2021: Unused places from the 2019-20 round of the FHLDS have been rolled over into this year’s allocation. The NHFIC states that about 1,800 vacant spots – reserved for first home buyers looking to purchase new or existing homes – were up for grabs, applications for which had to be made (via a participating lender) by 30 June, 2021. Another 10,000 FHLDS places will be available for the 2021/22 financial year on 1 July, 2021, the NHFIC states.


Can I buy a house with 5% deposit?

The First Home Loan Deposit Scheme and the FHLDS (New Homes) does allow eligible first home buyers to buy a home with as little as 5% deposit. There are a number of requirements (discussed below), including where you wish to buy your home, what type of home you want to buy, where your savings are from, and other factors.

It could be possible to buy a house with 5% deposit without the assistance of the FHLDS, depending on the requirements of your chosen lender and your financial situation. There are often first home buyer mortgage deals and sign-up incentives.

Keep in mind, however, that your deposit is just one part of the equation in working out if it’s a suitable time for you to buy. Having a bigger deposit means that you’ll have more equity in your home, which could reduce your likelihood of experiencing negative equity and mortgage stress. Seeking professional financial advice may be helpful to support you in considering if it may be a good time for you to buy, based on your personal circumstances and needs.


Would I be eligible for the First Home Loan Deposit Scheme?

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:

Eligibility checklist

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.

Compare First Home Buyer Loans^

^ 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.


Compare Home Loans with Canstar

The comparison table below displays some of the variable rate home loan products available on Canstar’s database for first home buyers with links to lenders’ websites. The products displayed are based on loan amounts of $350,000, $400,000 and $500,000 at 95% LVR in NSW, available for principal and interest repayments. The results are sorted by comparison rate (lowest to highest), then by provider name (alphabetically). Before committing to a particular home loan product, check upfront with your lender and read the applicable loan documentation to confirm whether the terms of the loan meet your needs and repayment capacity. Use Canstar’s home loans comparison selector to view a wider range of home loan products. Canstar may earn a fee for referrals.


*Comparison rate based on loan amount of $150,000. Read the Comparison Rate Warning.

*Comparison rate based on loan amount of $150,000. Read the Comparison Rate Warning.

*Comparison rate based on loan amount of $150,000. Read the Comparison Rate Warning.

How do I apply for the First Home Loan Deposit Scheme?

Step 1: Check

Step 2: Research

Step 3: Reserve

  • Contact your chosen lender(s) or their broker(s).
  • Tell them you’d like to be considered for the scheme, and what you’d like to buy.
  • The lender/broker will reserve a scheme place for you (if one is available).
  • It could be a wise idea to start looking for a home to buy or build as soon as possible after your scheme place is reserved.

Step 4: Apply

  • You have 14 days to obtain conditional approval for a loan (also known as pre-approval) from a lender. This will determine how much you can borrow and therefore how much you can spend on a home.
  • You do not have to go through the lender that reserved your spot (although you can only borrow through the list of approved lenders).

Step 5: Buy

  • You then have 90 days after you receive conditional approval to find, negotiate for and sign a contract on a property.
  • In some cases, extensions to this timeframe may be granted due to COVID-19. Talk to your lender.
  • Ensure the home is priced below the property price threshold for its location and property type.

Step 6: Settle

  • When you sign a contract to buy your chosen house, you then have up to 30 days for the settlement period – to allow time for the bank to finalise the loan, and for the usual legal processes that allow a house contract to settle.

Step 7: Move in~

  • Existing home: Move in within six months of settlement of your home loan.
  • House and Land Package: Start building your home within 12 months and finish building your home within 24 months of the settlement date for your home loan, and you must move into the property within six months of an occupancy certificate being issued.
  • Separate contracts for land purchase and home construction: Enter into an eligible building contract within six months, start building your home within 12 months, and finish building your home within 24 months of the settlement date for your home loan, and you must move in within six months of an occupancy certificate being issued.
  • Off-the-plan purchase: You must have signed the contract of sale before the settlement date for your home loan, and you must move into the property within six months of the occupancy certificate being issued.

~There may be extra conditions under the FHLDS (New Homes) program. Check with your lender.

What happens if I am not able to meet the contract conditions of the scheme, such as the move-in date?

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

What is the First Home Loan Deposit Scheme (New Homes)?

The FHLDS (New Homes) places are 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.

According to the NHFIC, to be eligible applicants must:

  • satisfy all FHLDS qualification requirements
  • enter into an eligible contract of sale or building contract before the 90-day home loan pre-approval period expires
  • sign a building contract with a licensed or registered builder, if applicable
  • have a building contract which specifies “a fixed price for the construction of the dwelling”

What properties can be bought under the FHLDS (New Homes) grant?

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:

  • newly-constructed dwellings (e.g., houses, units)
  • off-the-plan dwellings (e.g., houses, units)
  • house and land packages
  • land and a separate contract to build a new home

“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” (or at the specific cut-off date specified in subsequent releases for places). Additionally, the dwelling must:

  • not have been sold as a residential premise or have been tenanted under a long-term lease (50 years or more), although “substantially renovated” properties such as “knock down, rebuild” projects, could qualify
  • not have ever been rented as a commercial residential  or residential property
  • not have ever been lived in
  • be able to be lived in from your loan settlement date (of the home loan).

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:

  • have a contract of sale dated on or after 7 October 2020
  • move into the property within six months of the occupancy certificate being issued.

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:

  • have, before their 90-day home loan pre-approval expires, a contract for the sale of the land as well as an eligible building contract (dated on or after 7 October 2020) to build on that land
  • start building a new home within six months of entering into an eligible building contract
  • finish building within 24 months of starting
  • move into the property within six months of the occupancy certificate being issued.

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:

  • you buy the land from one person or company and
  • enter into a building contract with another person or company

To qualify, prior to the expiry of the pre-approval period, a buyer must:

  • have signed a contract of sale for the land
  • have an eligible building contract (dated on or after 7 October 2020) to build on that land
  • start building a new home within six months of entering into the eligible building contract
  • finish building within 24 months of starting
  • move into the property within six months of the occupancy certificate being issued

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:

  • be for a term of 30 years or less
  • have regular repayments of principal (with limited exceptions for interest only loans, which mainly relate to building loans)
  • include a mortgage over the purchased property
  • be in Australian dollars
  • have appropriate lending limits to recognise the Scheme’s deposit requirements
  • comply with relevant laws and the lender’s own policies.”

 

 

First Home Loan Deposit Scheme Application Illustration Banner

Can the FHLDS be combined with other government incentives?

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.

Learn more about FHB assistance from each state

QLD  .  NSW  .  ACT  .  NT  .  SA  .  TAS  .  VIC  .  WA  

What lenders can give loans under the First Home Loan Deposit Scheme?

These are the residential mortgage lenders participating in the First Home Loan Deposit Scheme, according to the NHFIC:

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 subsidiaries Bank of Heritage Isle and Border Bank)
P&N Bank
QBank
Queensland Country 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.

Location: How much can I spend on a house under the FHLDS?

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.

For new homes:

(also called the “Extended First Home Loan Deposit Scheme” and the “New Home Guarantee”)

←Mobile users: swipe to view price caps→

 

State or Territory Capital city/ regional centre price cap ($AUD) Rest of state price cap ($AUD)
NSW $950,000 $600,000
VIC $850,000 $550,000
QLD $650,000 $500,000
WA $550,000 $400,000
SA $550,000 $400,000
TAS $550,000 $400,000
ACT $600,000
NT $550,000
Source: Treasury

For existing homes:

←Mobile users: swipe to view price caps→

 

State or Territory Capital city/regional centre price cap ($AUD) Rest of state price cap ($AUD)
NSW $700,000 $450,000
VIC $600,000 $375,000
QLD $475,000 $400,000
WA $400,000 $300,000
SA $400,000 $250,000
TAS $400,000 $300,000
ACT $500,000
NT $375,000
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”.

 

Compare First Home Loan Deposit Scheme loans~

 

~Use “Filters” menu to adjust loan size, state, loan type and other information.

Don’t think you’ll qualify?

There are other options that could be available to you. It could pay to compare.

 

Compare First Home Buyer Loans^

 

^ 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.

First Home Loan Deposit Scheme FAQs

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:

 

  • 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
  • An ‘eligible building contract’ where you have a contract with a licensed or registered builder to build you a home within a set timeframe.

 

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:

 

  • A lower deposit means you 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).

It may be a wise idea to seek independent advice before taking on any large financial commitment. 

Disclaimers & Calculations


This is how we worked this out:
1 CUTS:  Source: www.canstar.com.au – 9/12/2020.

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.

Find out what the FHLDS could mean for approved applicants

Last updated: 17 May, 2021

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


Author: Amanda Horswill

nina.tovey

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.


Follow Canstar on Facebook and Twitter for regular financial updates.


Thanks for visiting Canstar, Australia’s biggest financial comparison site*

→ Looking to find a better deal? Compare car insurance, car loans, health insurance, credit cards, life insurance, as well as home loans, with Canstar. You can also check your credit score for free.