What is the First Home Loan Deposit Scheme?

The First Home Loan Deposit Scheme (FHLDS) is a new 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, from 1 January 2020,
for eligible low- and middle-income earners who have saved up a deposit of as little as 5% of a property’s value.

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


5 to 20% deposit 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
FHLDS Odds

Here's how we worked this out

Source: Canstar.com.au, December 2019

Mythbusting the First Home Loan Deposit Scheme

MYTH #1: First home buyers using the scheme will have to pay a higher interest rate than everyone else.

Not according to the National Housing Finance and Investment Corporation (NHFIC) – the government body administering the scheme – which 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.

FHLDS MYTH #1: First home buyers using the scheme will have to pay a higher interest rate than everyone else.

MYTH #2: All first home buyers will get help from the scheme. 

The scheme’s first wave is expected to support 10,000 first home buyers a year. In the year to August, there were around 108,000 first home buyers, based on data from Domain.com.au. Going by that statistic, there’s just under a one in 10 chance that you could access one, if you’re eligible. However, the launch of the scheme could see a spike in applications, as would-be first home buyers rush to apply, which could reduce those odds as a result.

FHLDS Myth #2 - All first home buyers will get help from the scheme.

MYTH #3: I can only buy a newly built house under the First Home Loan Deposit Scheme. 

Not true. While the First Home Owner’s Grant scheme only allows newly built homes to be bought, under the FHLDS, an eligible first home buyer could 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, which differ from region to region, and a list of eligibility requirements, too.

FHLDS MYTH #3: I can only buy a newly built house under the First Home Loan Deposit Scheme.

MYTH #4: There’s no risk associated with taking out a home loan with a small deposit.

There could be 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).
FHLDS MYTH #4: There’s no risk associated with taking out a home loan with a small deposit.

 

How Australians have responded to the First Home Loan Deposit Scheme

Canstar surveyed 2,061 Australian adults about the new First Home Loan Deposit Scheme. This is what we found:


FHLDS - Findings A

FHLDS - Findings B

FHLDS - Findings C


Top reasons why Aussies support FHLDS

Top reasons why Aussies oppose FHLDS

Source: Canstar.com.au, November 2019

Can the FHLDS be combined with other government incentives?

The FHLDS can be combined with other first home buyer assistance available from some state and territory governments.

For example, the First Home Owners Grant (FHOG) is 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.

If you are eligible to buy your property as a single using the First Home Deposit Scheme, you may also be eligible for:

Australia First Home Buyer FHB AssistanceNote26th Parallel refers to a line that divides Australia from east to west, located at Shark Bay in Western Australia.

View full-sized map

Learn more about FHB assistance from each state

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

Location, 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:

←swipe to view price caps→
Region Price Cap ($AUD)
NSW – capital city $700,000
NSW – regional centre (Newcastle and Lake Macquarie) $700,000
NSW – regional centre (Illawarra) $700,000
NSW – other $450,000
VIC – capital city $600,000
VIC – regional centre (Geelong) $600,000
VIC – other $375,000
QLD – capital city $475,000
QLD – regional centre (Gold Coast) $475,000
QLD – regional centre (Sunshine Coast) $475,000
QLD – other $400,000
WA – capital city $400,000
WA – other $300,000
SA – capital city $400,000
SA – other $250,000
TAS – capital city $400,000
TAS – other $300,000
ACT $500,000
Northern Territory $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”.

How to check your eligibility 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:

Australian citizens who are least 18 years old.

Singles with a taxable income of up to $125,000 per year or 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 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 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 both to the purchase of vacant land to the construction of a house on the land, the loan 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’. The NHF