Have you heard of the First Home Loan Deposit Scheme? Separate from the First Home Owners Grant, this Scheme was set up as another way of helping eligible first home buyers to get into their first home sooner.
When starting to think about buying your first home, the thought of having to save up the 20% deposit home loan lenders requires can be a little daunting. Often, singles or couples will have to start saving years in advance, making plenty of sacrifices along the way, to ensure they’ve got enough money in the bank to take this next step.
Thanks to the Government’s First Home Loan Deposit Scheme, eligible first home buyers will now only need to save a 5% deposit, with participating lenders agreeing to provide loans for 95% of the purchasing amount. This has previously been possible to do by paying a fee for Lenders Mortgage Insurance, however under this Scheme you won’t be required to pay for the insurance.
As always, there is a full list of eligibility criteria which you must meet in order to qualify, and there are also caps on the maximum purchase of price of the property which differ across the states.
- Income test
- As a single, your taxable income in the previous financial year must be less than $125,000
- For couples, your combined taxable income for the previous financial year must be less than $200,000
- Prior property ownership test
- If you’ve ever owned property in Australia in the past, either on your own or with someone else, you won’t be eligible for the Scheme
- Minimum age test
- To be eligible for the Scheme you must be 18 years of age or more
- Citizenship test
- It is a requirement that you are an Australian citizen at the time you enter into a home loan with a participating lender
- Owner-occupier requirement
- This Scheme is only to assist eligible Australians to purchase their own home, not an investment property. This means that you must move into the property within six months of the date of settlement, and continue to live in that property for as long as your home is guaranteed under the Scheme
- Deposit requirement
- You must have 5% of the purchase value saved up in your account to be eligible for the Scheme
- Price Cap
- In metropolitan Adelaide, this scheme is available for houses purchased up to the value of $400,000. Outside of the metro area, the price is capped at $250,000
On top of these eligibility checks, it’s also important to be aware that not all lenders are participating in the scheme and there’s a cap on the number of loans that can be approved each year. When the scheme was first launched in January it was capped at 10,000 loans per year, but on October 3 2020 it was announced that an additional 10,000 would be available in the 2020/21 financial year.
For full details about the Scheme, and to find out the latest updates, we recommend you visit the National Housing Finance and Investment Corporation website here.
The comments above are of a general nature only and are not intended to be, and should not be regarded as, legal advice. For legal advice on your specific circumstances, you must consult a suitably qualified professional advisor.
Image Credit: Sandy Millar