Government Help For First Home Buyers
The First Home Loan Deposit Scheme is for first home buyers that helps first home buyers get into the market sooner rather than later. How exactly does it work? What are the requirements? And if you’re eligible, how do you apply?
On 1 January 2020 the scheme was launched and was implemented to assist first home buyers with as little as a 5% deposit, without the need for LMI lenders mortgage insurance.
The government will step in and guarantee the difference between your deposit and the 20% deposit required by most lenders. Lenders normally apply a LMI lenders mortgage insurance but this is a way for you to avoid that with a guarantee provided by the government.
Let’s say you are buying a home valued at $450,000, and you only have a deposit of $40,000 – which is less than 10% of the purchase price. The government would provide the difference up to the required 20%, which in this case, would be $90,000. Therefore, the government would provide $50,000 way of guarantee.
The guarantee equates to a family member helping you get into the property market. Whilst the guarantee is not a cash payment, it can be used in conjunction with your deposit and any other grants or concessions, namely, the first homeowners grant and some stamp duty concession for various states.
From the outset, only 10,000 places were made available for the guarantee and within the first few months those quickly ran out, so another 10,000 were made available from 1 July 2021.
Of course, there are certain requirements that you need to fulfill in order to qualify: for example, if you are a single income earner, your income threshold needs to be less than $125,000 in the last financial year or, if you are a couple, married or de facto your combined taxable income cannot exceed $200,000 in the last financial year. A number of other requirements are listed when you click on the link at the end of this article.
The scheme is only available to those first homebuyers looking to become an owner occupier, not for those looking to purchase an investment property. Whilst you may purchase any of the following using the guarantee, remember if combining with the first home owners grant, you need to buy new.
- an existing house, townhouse or apartment properties).
- a house and land package
- land and a separate contract to build a home
- an off-the-plan apartment or townhouse.
If, however, you fall short of qualifying for the First Home Loan Deposit Scheme, you may still be able to avoid lenders mortgage insurance by having a family member act as a guarantor for part or all of the loan. For decades, Mums and Dads around the country have been assisting family members take the first step into owning their own property. This scheme, thanks to the government contribution, enables those that don’t have access to those family members, to move into the property market sooner.
Things to consider:
- Are you currently employed?
- Do you meet the lender’s credit requirements?
- Can you meet the repayments throughout the whole period?
- Do you have genuine savings?
- Can you afford stamp duty and other legal expenses?
Whilst this article highlights the fundamentals for the First Home Loan Deposit Scheme, please see the link below to the government websites, which list all the eligibility and criteria for access to the scheme.
