Since 1 January 2020, the First Home Loan Deposit Scheme (FHLDS) has been on offer to first home buyers. The FHLDS allows first home buyers to purchase a property with a minimum 5% deposit without needing to pay Lenders Mortgage Insurance (LMI). What is LMI? See our LMI information blog here.
This allows first home buyers to enter the property market and save on the cost of Lenders Mortgage Insurance, which is usually around 2% of the loan amount (can vary lender to lender). For example, on a loan of $300,000 the applicant would be saving $6,000 in Lenders Mortgage Insurance premium, plus avoiding having to pay the additional interest on the $6,000 if it had been capitilised onto the loan.
Like with all offers there is eligibility criteria that applicants will have to satisfy to qualify for the scheme:
- All applicants must be Australian citizens;
- All applicants must be first home buyers;
- All applicants must be at least 18 years of age;
- All applicants must have a valid Medicare Card or Defence ID;
- Maximum purchase price/value of the property of $400,000 for the Perth metro area and regional centres, or maximum purchase price/value of the property of $300,000 for the rest of the state (thresholds vary state to state);
- Income threshold for single applicant is $125,000 or less in the last financial year;
- Income threshold for a couple is less than $200,000 in the last financial year; and
- Must have a minimum of 5% genuine savings – for example on a $400,000 purchase the applicant would need to show a minimum of $20,000 between genuine savings and rental payments made to a licensed real estate agent
Other points to be aware of with the FHLDS is that it is only available to owner occupied purchases (not first property purchases that will be used as an investment property), and the loan will typically need to be a principal and interest (P&I) loan for the period of the guarantee. Where an applicant has applied for a construction loan, the loan repayments will remain Interest Only (IO) while the home is being built as the loan is a construction loan, once construction is finalised the loan will revert to a standard home loan and principal and interest (P&I) repayments will commence.
There are 10,000 grants that are released at the start of each financial year. Commonwealth Bank of Australia (CBA) and National Australia Bank (NAB) are the only two major lenders participating in the scheme. CBA & NAB have been allocated 5,000 grants between the two lenders, with the remaining 5,000 grants allocated to the following lenders:
- Australian Military Bank;
- Auswide Bank;
- Bank Australia;
- Bank First;
- Bank of Us;
- Bendigo Bank;
- Beyond Bank Australia;
- Community First Credit Union;
- Defence Bank;
- Gateway Bank;
- G&C Mutual Bank;
- Indigenous Business Australia;
- MyState Bank;
- People’s Choice Credit Union;
- Police Bank;
- P&N Bank;
- Queensland Country Credit Union;
- Regional Australia Bank;
- Sydney Mutal Bank;
- Teachers Mutual Bank;
- The Mutual Bank;
- WAW Credit Union.
To find out more about the FHLDS or to speak to one of our mortgage brokers to see if you are eligible, contact us today on 08 9442 3777 or at email@example.com.
*All information is current as at July 2020