You could buy your first home sooner than you thought

Saving for a house deposit can be one of the largest (if not the largest) barriers to entry for many first home buyers. Currently, the only way to delve into the property market is to save at least 20% of the property’s value in order to secure a home loan, alternatively rely on a guarantor, or go down the route of paying for Lenders Mortgage Insurance or a Low Deposit Premium.

In response to this barrier, the Australian Government has introduced a First Home Loan Deposit Scheme (FHLDS) which supports eligible first home buyers on low and middle incomes to purchase their first home with a deposit as little as 5 per cent.

How does the FHLDS work?

Under the FHLDS, eligible borrowers will be required to provide a minimum of 5% of the property’s value towards the deposit. The National Housing Finance and Investment Corporation (NHFIC) will then guarantee the remaining 15%.

The Scheme is similar to a parental or family guarantee which already exist, however in this case, the NHFIC will act as your guarantor.

The Scheme will support up to 10,000 first home loan guarantees each financial year and can be used in conjunction with other government programs like the First Home Super Saver Scheme, state and territory First Home Owner Grants and stamp duty concessions.

The Scheme is not a cash payment or a deposit for your home loan.

What properties are eligible under the Scheme?

Several property types are eligible under the Scheme, however they are also controlled by property price thresholds depending on the location of the property.

Eligible property types include:

• 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

Property price thresholds vary for capital cities (and regional centres) and the rest of the state. You can read them here.

Am I eligible?

There are several requirements to be eligible under the Scheme. The easiest way to check your eligibility is to use the online test via the NHFIC website here.

What else do I need to consider with the Scheme?

Some other important aspects to keep in mind when considering the FHLDS include:

• Canstar.com.au found that 41% of people oppose the FHLDS due to the risks associated with first home buyers financially overcommitting.
• Be sure to speak with your lawyer, your accountant and a financial institution that is a registered FHLDS provider either directly or through your mortgage broker to look at your own personal situation.
• Ensure you make a well-informed decision about where to buy your property in terms of its market prospects and capital growth, as opposed to buying a property based on the price cap. Ensure you do your market research.
• You can only use financial institutions that are participating lenders under this Scheme. Take a look at the list of participating lenders here.
• You can only receive the Government guarantee once.

Where can I find out more information?

If you are looking for more information on the FHLDS, take a look here:

• First Home Loan Deposit Scheme Fact Sheet
• First Home Loan Deposit Scheme FAQs
• Canstar.com.au

If you would like to find out more about the First Home Buyer Deposit Scheme, read our blog here.

If you would like to find out more about how the purchasing process works, download our FREE conveyancing e-guide here.

For further information please contact Donovan Oates Hannaford on 02 6583 0400 or info@dohlaw.com.au.