Australian Government’s First Home Loan Deposit Scheme helps low and middle-income earners buy a modest first home with a deposit as low as 5%. The federal government provides a guarantee to the lender of up to 15% of the loan.
The government effectively acts as a guarantor for the cost of lenders’ mortgage insurance (LMI) typically required by homebuyers who do not have a 20% deposit. First home buyers should take advantage of this Scheme to avoid paying potentially thousands in LMI fees since the government guarantees the difference (up to 15%).
The government initiative provides up to 10,000 first home loan guarantees each financial year. So, continue reading to find out how you can secure a place with the Scheme for the upcoming financial year.
How the FHLDS Works?
Data from 2019 shows the average person or couple in Queensland takes up to seven to eight years to saves for a deposit.
However, under the FHLDS Scheme, if you’ve saved up a minimum of 5% of the property value, the federal government act as a guarantor of up to 15%, avoiding the hefty cost of LMI and fast-tracking your entry into the property market.
In other words, under the Scheme, you avoid paying the hefty fees associated with insuring your home loan with a lender’s mortgage insurer. Instead, the government acts as your mortgage insurer for the home loan and guarantees any shortage in your deposit.
The National Housing Finance and Investment Corporation (NHFIC) branch of the government guarantees the deposits. The NHFIC, in consultation with industry leaders, implements the Scheme through a board of contracted lenders with an Australian financial services licence (AFSL). You cannot apply for the Scheme directly through the NHFIC.
In the initial launch of the Scheme in January 2020, 10,000 places were made available for first home buyers to purchase or build a new home with as little as a 5% deposit granted that they are eligible and meet the lenders’ checks. These 10,000 places are renewed every financial year.
Of those 10,000 places, 2,000 guarantees were not finalised and rereleased. Since 15 February 2021, some lenders have accepted applications for the FHLDS. The Morrison Government announced that any unused guarantees from the 2019/20 financial year would be reissued on July 2021 – an even greater opportunity for first home buyers to apply for reissued places.
Currently, there are no caps on the number of guarantees per state; so first-time buyers looking at the Gold Coast property should take advantage. While states are not limited to a set number of deposit guarantees, the government intends to monitor and modify the guarantee where needed continuously.
First home buyers taking out loans under this Scheme must adhere to the loan principal’s required repayments for the entire period of the agreement.
Loans relating to building a house on the land and the purchase of vacant land are payable with interest-only repayments.
FHLDS – New Home Guarantee
Under the 2021- 2022 Federal Budget, the Australian Government announced another 10,000 new places under the FHLDS (New Homes) for first home buyers buying new or newly built homes. The FHLDS (New Homes) extension differs from the existing FHLDS as it is only available for purchases of a new or a newly built home rather than newly constructed and established homes.
In addition, the extension also includes an increase in property price threshold for new homes, with the Gold Coast and the Sunshine Coast seeing increases from $475,000 – $600,000.
Since the announcement, major lenders and some smaller lenders have started accepting new requests from eligible applicants to join waitlists.
The previous year, occupancy of places was prompt, and it is expected that these deposit guarantees will be unavailable within the first couple of months after release.
Don’t miss out; keep reading to find out how you can reserve your Scheme place today.
What is categorised as 'new home' under the FHLDS New Home Guarantee?
Eligible ‘new homes’ under the FHLDS New Home Guarantee (NHG) include:
- newly built homes (freestanding house, townhouse, or apartment)
- off-the-plan dwellings (freestanding house, townhouse, or apartment)
- house and land packages
- land and a separate building contract for a new home.
Eligibility is dependent on the borrower’s status as a first home buyer and the property’s new home classification.
Am I eligible for the First Home Loan Deposit Scheme?
There are several eligibility criteria to qualify for the Scheme. It is also essential that the first home buyers meet all the criteria and not a majority: The eligibility requirements are as follows:
- participate as a single or couple. Couples must either be married or in a de-facto relationship to be eligible. Borrowers cannot succeed three or more, and other relationships between borrowers, such as siblings, parent/child or friends, are not eligible.
- First home buyers must be 18 years of age and Australian Citizens holding a Medicare card to be eligible. Permanent residents are not eligible even if applying as a couple where one is an Australian citizen;
- Meet the income test whereby single first-home buyers earn up to $125,000 per year or couples earning up to $200,000 per year. To qualify, your income recorded in the ATO’s Notice Of Assessment must be from the preceding financial year;
- A minimum deposit of at least 5% (and under the maximum of 20%) is accumulated through genuine savings for most lenders;
- Applicants must never have previously owned or had any interest in a residential dwelling in Australia (separately or jointly owned). Company title properties or residential strata, regardless of use as investment or owner-occupancy, render you ineligible.
- Applicants must intend the property to be their principal place of residence as an owner-occupier. They must intend to move into and live in the property within six months from either the date of purchase or for newly constructed builds, from the date on the occupancy certificate is issued;
- The value of the homes intended to be purchased under the Scheme is under the price cap of the area.
Many lender’s websites have eligibility tools; however, each lender will also have their specific criteria for the Scheme.
Do I only need a 5% deposit?
In addition to the minimum 5% deposit required under the Scheme, first home buyers must pay stamp duty, legal fees, bank fees, and government transfer fees, where the loan to value ratio (LVR) is greater than 95%.
For example, a first home buyer in the Gold Coast for a $500,000 purchase will need a $25,000 (5%) deposit plus extra funds to complete the purchase.
Generally, for the example above, the extra funds required will be:
· Stamp duty – $0 (no stamp duty for first home buyers)
· Mortgage Registration Fee: $195
· Loan application fee – $600 (These fees vary from $0 to $600)
· Legal/conveyancing costs – $1,800
· Transfer Fee – $639.00
· Lenders Mortgage Insurance (LMI) fees – $0 (not applicable under the First Home Buyer Scheme).
So, your total funds required to complete the purchase is $25,000 plus $3,234 (approx.) as extra funds. This does not include any costs incurred via inspections/reports or similar additional costs.
Does a deposit have to be genuine savings?
Under the Scheme, most lenders, including the major lenders, require your deposit to be “genuine savings”, which means that you’ve saved yourself for the deposit over time.
Smaller lenders will accept proof of genuine saving as paid rent or rental history.
HOTELESQUE PRIVILEGES!
What types of properties can be bought under the Scheme?
Under the FHLDS Scheme, eligible first home buyers can buy the following types of residential properties:
- An existing house, townhouse or apartment
- A vacant land together with a separate contract to build a home
- An off-the-plan (freestanding house, townhouse or apartment)
- A house and land package
Upon pre-approved for a home loan, you’ll have 90 days to sign a contract of sale for an eligible dwelling.
Finally, upon signature of the contract of sale, finalising of the paperwork and checks for your home loan must be completed within an additional 30 days.
Eligible ‘new homes’ under the FHLDS New Home Guarantee (NHG) include:
- newly built homes (freestanding house, townhouse or apartment)
- off-the-plan (freestanding house, townhouse or apartment)
- house and land packages
- land and a separate contract to build a new home.
Eligibility is dependent on the borrower’s status as a first home buyer and the property’s new home classification.
What are the property price caps for the first home loan Scheme?
To be eligible for the Scheme, the property’s value cannot exceed the area’s price cap where that property’s located.
The property price threshold differs between states and between the city, large regional centre or regional areas.
Is the Gold Coast considered a large regional centre?
As the Gold Coast and the Sunshine Coast has a population of over 250,000, and it is considered a large regional area under the Scheme which is recognisably more expensive than other regional areas.
What will I need to provide to apply for the Scheme?
All application and documents must be submitted directly to the participating lender or your mortgage broker, whom will give to the participating bank.
The NHFIC does not accept direct applications.
First home buyers will need to provide the following:
- Your full name and date of birth (DOB);
- Your Medicare number and your position (number) on the card;
- Your Notice of Assessment for the previous financial year; and
- Other typical home loan documents.
Important Note: To qualify for the FHLDS form the 1 July 2021, you need to provide your Notice Of Assessment from the ATO starting from 1 July 2020.
First home buyers who get the Notice Of Assessment for 2020/21 sooner can sooner apply for the FHLDS, therefore, secure one of the limited spots in the Scheme.
In other words, complete 2020/21tax return done as soon as soon as possible to get in first – resembling a “first in best-dressed” scenario.
What is the application process to apply for a guarantee under the First Home Loan Deposit Scheme?
Borrowers are required to apply through one of the 27 lenders contracted by The National Housing Finance and Investment Corporation (NHFIC).
Note: The NHFIC does not accept direct applications.
The process to apply for a guarantee under the First Home Loan Deposit Scheme is as follows:
- Assess your eligibility as a first home buyer
- You or a broker enquires with one of the 27 participating lenders under the Scheme who will assess your first-home buyers’ eligibility for the Scheme alongside standard home loan checks.
- The lender will then log onto the Scheme portal to ascertain if a Scheme place is available.
- The lender will then reserve a place for you, if available, by providing your first name, last name, surname, DOB (date of birth), and Medicare number.
- You can apply with multiple participating lenders under the Scheme, but only one place is reserved per applicant at any given time.
- Your initial home loan application allows you to make a Scheme reservation for up to 14 calendar days. It cannot be extended unless finance pre-approval is given under the Scheme Portal.
- To obtain a pre-approved place, the participating lender must provide your details and documents, including; the taxable income (single or couple), Notice of Assessment for the previous financial year, the date of finance pre-approval, and intended purchase location.
- Obtaining pre-approved, you have 90 days from the date of issuance to search for a property within the purchase location.
- Upon signing a Contract of sale, you and your participating lender have an additional 30 days to finalise all the documentation to apply to the NHFIC for a Guarantee Certificate.
- Upon a Guarantee Certificate, the participating lender updates the loan settlement information with the NHFIC.
INVEST IN THE GOLD COAST
What if I am eligible, but there are no places at the time of applying?
If you are eligible, but the places under the Scheme have been exhausted, you can still submit a reservation request. You will then be waitlisted.
What are the differences between the lenders?
Despite being eligible for the first home buyer scheme, lenders apply their lending criteria before approving you for the home loan. Therefore, an individual borrower’s financial position will be more suited to different lenders.
For example, applicants with lower credit scores will be rejected by major lenders with a highly selective credit scoring system. Whereas smaller lenders generally offer more flexible credit score systems.
Some of the differing requirements between lender policies are:
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- Genuine savings,
- Income and living expenses assessment
- Credit score systems
- Security
Finding the right lender can be challenging, so to start, make sure you choose your lender from among the panel of participating lenders under the First Home Loan Deposit Scheme.
Can I participate in any other government schemes if I get the First Home Loan Deposit Scheme?
Interestingly, your successful application for a first home loan deposit does not restrict you from accessing other federal or state government programs:
Other programs you may wish to consider for Queensland first home buyers include:
- First Home Super Saver Scheme
- First Home Owner Grant
- HomeBuilder grant
- Stamp duty Concessions
- Queensland Government’s First Home Owners Grant
- Queensland Government’s Owner-Builders and the first homeowner grant
These federal and state programs apply their eligibility criteria, and participation under the First Home Loan Deposit Scheme does not mean you are eligible for the other programs.
Additional Resources For First Home Buyers
For additional information and resources, please view the below links released by the NHFIC for the first home buyers Scheme: