Buying your very first home is a significant milestone. The culmination of all your hard work and careful saving for a deposit over the years as you searched for the perfect place to call home. Presently, if you were to go out and purchase a house today, you would likely need to have 20 per cent of the property’s value saved as a deposit in order to secure a home loan. However, as of January 1, 2020, things may become a little easier if you are one of 10,000 borrowers eligible for the First Home Loan Deposit Scheme.
The scheme was announced earlier this year, with the Commonwealth government committing $500 billion in the form of equity to the National Housing Finance and Investment Corporation (NHFIC).
What is the First Home Loan Deposit Scheme?
Alright, lets get down to the nitty gritty. The scheme is intended to make purchasing a home easier for many first home buyers. Each financial year, 10,000 first home buyers on low and middle incomes will be eligible to secure a property with as little as a 5 per cent deposit without paying lenders mortgage insurance (LMI). Usually, lenders require borrowers to take out a policy if the deposit is less than 20 per cent, with LMI often adding an extra $15,000 or so to first home buyer costs.
Under the new arrangement, the government will offer loan guarantees for Melbourne properties worth up to $600,000 and $375,000 across other parts of the state. The NHFIC has developed a tool that enables first home buyers to find out the property price threshold for the suburb they are looking to purchase a home.
What does it mean for you?
To be eligible for the FHLDS, the contract of sale must be dated after January 1, 2020. Since the scheme is first come, first serve, this may mean that purchasing a property is a new year’s resolution for many home buyers! Interested buyers can check if they meet the FHLDS eligibility criteria before applications open in January here.
If you’re an eligible first home buyer, you’ll need a 5 per cent deposit to apply for a home loan. The additional 15 per cent will be provided by the NHFIC, and administered by an approved lender. This will be available to individuals earning up to $125,000 or couples earning up to $200,000 per annum.
More information will soon be provided by the NHFIC regarding eligibility, participating financial institutions and application and assessment processes in anticipation of applications opening on January 1, 2020.