Purchasing your first home is a mix of making a daunting life decision and overwhelming excitement all at once. Even though you’re locking yourself in for a significant debt for the first time and you might be doubting your saving ability, there are many support systems in place to make the process of buying your first home easier.
The First Home Loan Deposit Scheme is a new initiative by the Australian Government and the National Housing Finances and Investment Corporation (NHIFC), where the Government will guarantee support for a percentage of your deposit.
Generally, you need to save a minimum of 20% of a home’s value as a deposit to avoid paying extra insurance and bank fees on your first home loan. Referred to as Lenders Mortgage Insurance, you’re basically paying the bank a fee to cover you for the amount you fall short on your deposit. With the new Deposit Scheme, the minimum deposit you’re required to pay, to avoid extra fees, is just 5%. If you can put forward 5% of your new home’s value, the Government and NHIFC will provide a guarantee to your bank for the remaining 15% (maximum).
This is not a cash payment or a deposit for your house, and there are no costs involved. What you get is support in the form of a guarantee from the Government to your bank, that you will be responsible for meeting all costs and repayments over the life of the loan. What’s even better, is this Scheme can be used in conjunction with other initiatives like the First Homeowners Grant (which exempts you from paying stamp duty on your first home).
As expected, there are rules for eligibility, which are outlined in great detail here. Some of them are:
If you can tick off all of these criteria, then you are eligible to apply for a place in the scheme but be quick because there are limited places available in this financial year. The Deposit Scheme is only offered in partnership with certain lenders though, so it’s best to talk to your lending specialist to reserve your position in the Scheme before they run out. There will be more places released after July 2020.
Information is intended to be of a general nature only and any advice has been prepared without taking into account any person’s particular objectives, financial situation or needs</em