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.
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.
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.
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:
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.
There could be risks to weigh up when applying for a home loan with a low deposit, including:
Canstar surveyed 2,061 Australian adults about the new First Home Loan Deposit Scheme. This is what we found:
Source: Canstar.com.au, November 2019
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:
Note: 26th Parallel refers to a line that divides Australia from east to west, located at Shark Bay in Western Australia.
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:
| 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”.
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 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, 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.
These are the residential mortgage lenders participating in the first round of the First Home Loan Deposit Scheme, according to the NHFIC:
Major bank lenders which opened FHLDS applications from 1 January, 2020, are:
Non-major lenders which will be opening FHLDS applications from 1 February, 2020, are:
A new round of the scheme will begin on 1 July, 2020, when a further 10,000 places will be made available.
Buying a home is perhaps the biggest investment that many Australians will make. We’ve rounded up some helpful information:
Getting ready to buy:
Buying a property:
Canstar News - January 14th
The initiative is designed to help eligible Australian first home buyers with deposits as low as 5% to get a loan, without needing to pay for lenders’ mortgage insurance (LMI). https://twitter.com/MichaelSukkarMP/status/1172027995789258752 But property research house CoreLogic...
– Read more
Canstar News - December 12th
The National Housing Finance and Investment Corporation (NHFIC) has released the list of residential mortgage lenders involved in the first round of the scheme, which kicks off on 1 January, 2020. The scheme is designed to help eligible Australian first...
– Read more
Canstar News - December 4th
The National Housing Finance and Investment Corporation, which is the government agency administering the scheme, has just released more concrete details about the First Home Loan Deposit Scheme (FHLDS). The FHLDS is a government guarantee which...
– Read more
First Home Loan Deposit Scheme - May 24th
A mortgage offset account is a savings or transaction account that is linked to your home loan. The money in your account is “offset” daily against your loan balance, meaning that the loan pretends that you have paid the balance of the account off your loan.
– Read more
This is how we worked this out:
1 CUTS: A scheme participant earning an average full-time salary could potentially take out a home loan around four years and three months sooner than if they saved for a 20% deposit. Time required to save for deposit calculations are based on a 5% deposit vs. a 20% deposit on a property valued at $400,000. Calculations assume the borrower:
2 SAVES: The FHLDS will allow participating borrowers to avoid paying Lender’s Mortgage Insurance (LMI), which low-deposit home buyers taking out a 30-year loan without the scheme would typically be charged. Savings estimate is based on the average LMI insurance premium quoted from Genworth’s LMI premium estimator calculator for a 95% LVR loan on a property valued at $700,000, which is the maximum property price cap under the scheme.
3 COSTS: This estimate is based on the total cost of a FHLDS-supported loan and a 5% deposit, compared to paying a 20% deposit when buying a house outside the scheme. Source: www.canstar.com.au – 3/12/2019. Interest rate calculations based on the average rates on Canstar’s database for variable owner-occupier loans available to first home buyers (including first home buyer only loans) for a property value of $400,000 at 80% and 95% LVR, and principal & interest repayments over a 30-year loan term.
4 ODDS: Based on Domain statistics for the year to August 2019, where about 108,000 first home buyers secured a loan. Odds could be different under the scheme, depending on demand.
