What is the 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. The next release of 10,000 scheme places opens on 1 July, 2020.

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


Here's how we worked this out

Source: Canstar.com.au, December 2019

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

  1. Visit a participating bank or their broker: Tell them you’d like to be considered for the scheme. 
  2. Reserve a place: Your chosen participating lender will assess if you are eligible for a spot in the scheme. If you are, and there’s a spot available, they will reserve a place on the scheme for your loan. You’ll be required to provide proof of your full name and date of birth; your Medicare number; your Notice of Assessment for your taxable income for the 2018-19 year, and other documents your lender may require for their assessment.
  3. Finalise your budget: After that, you have 10 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.
  4. Find a house: You then have 90 days to find, negotiate for and sign a contract on a property, ensuring the home is priced below the property price threshold for its location. Price caps vary according to state and region. It could be wise to stay in contact with your lender during this time and update them regularly.
  5. Buy the house: 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.If you are having trouble completing this process on time due to delays stemming from the COVID-19 crisis, the NHFIC says that you could be eligible for a 90-day extension. Ask your lender: “We recommend that you do so at least two weeks prior to the expiry of your pre-approval to allow your participating lender sufficient time to determine whether you are in fact eligible and process your extension request”, the agency states.
  6. Move in: You must then be living in the house within six months of settlement.

Source: First Home Loan Deposit Scheme information booklet


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:

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.

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.

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  

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

These are the residential mortgage lenders participating in the first round of 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
Defence Bank
Endeavour Mutual Bank
G&C Mutual Bank
Gateway Bank
Indigenous Business Australia
MyState Bank
National Australia Bank
People’s Choice Credit Union
Police Bank
P&N Bank
Queensland Country Credit Union
Regional Australia Bank
Sydney Mutual Bank
Teachers Mutual Bank (inc. Firefighters Mutual Bank, Health Professionals Bank and UniBank)
The Mutual Bank
WAW Credit Union

A new round of the scheme opened on 1 July, 2020, when a further 10,000 places were made available. 

It could be a wise idea to seek professional financial advice.

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:

←Mobile users: 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”.

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.

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.

Latest in First Home Loan Deposit Scheme


Disclaimers & Calculations

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:

  • earns the average full-time salary for an Australian worker ($1695.10 a week or $88,145.20 a year at the time of writing); and
  • pays the marginal tax rate of 32.5%; and  
  • deposits 20% of their after-tax income into a bonus saver account with a total rate of 1.56% (based on the average total rate of bonus saver products on Canstar’s database for an initial $10,000 deposit). 

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.

Find out what FHLDS could mean for approved applicants

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

Author: Amanda Horswill


Amanda is a Senior Finance Journalist 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.