First Home Buyers

First Home Loan Deposit Scheme

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What is it?

The First Home Loan Deposit Scheme (FHLDS) is a government initiative that both Liberal and Labour parties promised as part of the 2019 Federal Election. This is big news for potential first home buyers, with the new incentive aimed to increase the purchasing power of young Australians and encourage them to achieve their dream of home ownership. The FHLDS will help eligible first home buyers purchase a home with a deposit as little as 5%, guaranteeing any shortfall in the 20% deposit required by most lending institutions.

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How does it work?

To be approved for the FHLDS, you will need to lodge an application through participating lenders or their authorised representatives, and demonstrate your eligibility. More information can be found on the application process here. Once accepted, you can look at applying for a loan with your preferred broker, for which the Government will basically act as a guarantor. This ensures you avoid paying costly Lenders Mortgage Insurance (LMI), something that can add tens of thousands of dollars to a mortgage.

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The FHLDS will have the ability to be used in conjunction with the First Home Super Saver Scheme (detailed in section 7), as well as relevant grants and concessions.

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What are the eligibility criteria?

The FHLDS will support up to 10,000 eligible first home buyer loans each year. To be eligible you will need to have saved a home deposit between 5% and 20% (not over), you must be a first home buyer of at least 18 years old, and you must have a taxable income of up to $125,000 per annum for singles and up to $200,000 per annum for couples (based on the previous financial years taxable income).

The National Housing Finance and Investment Corporation (NHFIC) has developed a tool to help first home buyers find out whether they meet the scheme’s eligibility criteria, which you can find here. There’s also additional resources available on how to apply.

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What types of property can I buy?

Under the scheme, an eligible first home buyer has several purchase options: you can build a brand new home, either purchased via a house and land package or by separate land and build contracts; an off-the-plan townhouse or apartment; or, an established property. If you’re keen on being one the the first cabs off the rank, house and land packages or off-the-plan builds are some of the quickest ways to ensure you have your piece of land and are buying ready.

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*These figures are provided by Loan Market and are a guide only. The cost of Lenders Mortgage Insurance will vary by state and lender. Speak to a finance professional for tailored information

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Exactly how much can I save?

The First Home Loan Deposit Scheme could save first-time buyers thousands of dollars by eliminating the need to pay Lenders Mortgage Insurance (LMI). Let’s take a look at just how much can be saved under the scheme*

Buying a $600,000 property

Price threshold for VIC – Melbourne and Geelong regions

A buyer with savings of $30,000  wanting to buy a home for $600,000 could pay more than $25,000 in LMI.

Buying a $375,000 property 

Price threshold for all other VIC regions

A buyer with savings of $18,75  wanting to buy a home for $375,000 could pay around $12,300 in LMI. 

Buying a $475,000 property

Price threshold for Queensland – Brisbane, Gold Coast and Sunshine Coast regions

A buyer with savings of $23,750‬ wanting to buy a home for $475,000 could pay more than $15,000 in LMI. 

Buying a $400,000 property

Price threshold for all other QLD regions

A buyer with savings of $20,000‬ wanting to buy a home for $400,000 could pay anywhere between $13,000 and over $16,000 in LMI.

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How do I apply?

The FHLDS officially opened on January 1st, 2020. You must apply for the scheme through one of the listed participating lenders, and you can contact any one of the organisations linked for further details. The NHFIC does not accept applications directly and is not able to provide personal financial advice. First home buyers are encouraged to consult with a participating lender and seek their own independent financial and legal advice on how to structure their loan arrangements in a way that suits their own personal circumstances.

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Please check your desired property is eligible to be purchased under the scheme.

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What else should I know?

We mentioned the First Home Super Saver Scheme – so what’s that?

The new First Home Super Saver (FHSS) scheme allows you to voluntarily contribute up to $30,000 to your super and withdraw this amount (plus earnings, less tax) to buy your first home. Voluntary contributions include before-tax contributions, such as salary sacrifice, and after-tax contributions. Because you’re saving through super, you pay less tax which means you can build a bigger deposit more quickly.

We recommend jumping on the ATO website and doing some individual research as there’s a few important things to be across with this one!

As for the First Home Loan Deposit Scheme, another thing to be mindful of is the property price caps. These vary from state to state, and from capital cities to regional centres, so be sure to check them out on the Government website.

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Seek independent advice

The information provided is meant as a guide only. Porter Davis recommends that all clients seek independent legal, tax and financial advice. Full T&Cs here

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