The first release of the First Home Loan Deposit Scheme (FHLDS) has now been snapped up.  It has proven to be hugely popular with first home buyers despite COVID-19.

If you are a first home buyer and hoping to buy in the next 6 months the good news is that as of the 1st of July 2020 the government will be releasing another 10,000 guarantees so now is the time to get yourself prepared.

There are some key things to understand when applying for the First Home Loan Deposit Scheme of which I have explained below.

What is the First Home Loan Deposit Scheme?

The first home loan deposit scheme provides a guarantee to eligible first home buyers with a deposit of 5%.  If eligible for the guarantee it means that you would not have to pay the lenders mortgage insurance (LMI).

Who is it available to?

The scheme will be available to the first 10,000 applicants who meet the following criteria:

  • Singles taxable income up to $125,000
  • Couples taxable income up to $200,000
  • Couples are only eligible if they are married or in a de-facto relationship
  • Owner-occupied properties only (not investment properties)
  • Principal and interest loan repayments (not interest only repayments)
  • Australian citizens who are at least 18 years of age (permanent residence are not eligible)

Which lenders are participating in the scheme?

Not all lenders are participating in the First Home Loan Deposit Scheme.  To find the full list of lenders you can head to https://www.nhfic.gov.au/what-we-do/fhlds/ or call Nikki at Cherry Lending & Finance on 0427 374 155 to find out more.

Limitations

  • Not all lenders are taking place so if you don’t meet the serviceability criteria policy of those lenders involved you may not have access to the scheme.
  • There are property price thresholds so if you are wanting to purchase a property at a higher price point you will not have access to the scheme.
  • Your application will be subject to lender review and approval as per any loan application.

5% Deposit & Genuine Savings

One of the eligibility requirements for the FHLDS is that you must have a 5% deposit to contribute towards the purchase.  It is important to understand how the banks/lenders view this 5% deposit as I am finding a lot of my first home buyer clients are ill advised about this and unfortunately are not therefore ready to submit a loan application.

‘Genuine savings’ is usually classed as money saved over time that sits in an account for a minimum of 3 months.  However, different lenders have different policies around what they deem as genuine savings, so it is important that you understand this before applying for a loan.

For example, there are some lenders that will allow you to use a lump sum payment (a gift for example) so long as you have a history of paying rent.

Effectively what lenders are looking for is proof that you can make regular repayments over a certain period of time, just as you will be required when taking on a mortgage.

If you’d like to find out more about reserving a spot for the First Home Loan Deposit Scheme and applying to get a pre-approval in place, or to discuss if you fit the lender’s criteria around genuine savings, please call Nikki on 0427 374 155.

This page /newsletter provides general information only and has been prepared without taking into account your objectives, financial situation or needs. We recommend that you consider whether it is appropriate for your circumstances and your full financial situation will need to be reviewed prior to acceptance of any offer or product. It does not constitute legal, tax or financial advice and you should always seek professional advice in relation to your individual circumstances.