First Home Loan Deposit Scheme Borrow up to 95% with no LMI‎

Buying your first home is a significant milestone, but it can also be challenging, especially when it comes to saving for a deposit. Fortunately, the Australian government has introduced the First Home Loan Deposit Scheme to help first-time buyers get a foot on the property ladder. This blog will provide a simple and easy-to-understand guide on the First Home Loan Deposit Scheme, explaining how it works, its benefits, and tips to make the most of it.

Understanding the First Home Loan Deposit Scheme

An Australian government program called the First Home Loan Deposit Scheme (FHLDS) aims to help qualified first-time homebuyers buy a property sooner. Under this scheme, first home buyers can borrow up to 95% of the property's value without needing to pay Lender's Mortgage Insurance (LMI). Typically, LMI is required when borrowers have a deposit less than 20% of the property's value. By eliminating the need for LMI, the scheme makes it more affordable for first-time buyers to enter the property market.

How Do You Operate the First Home Loan Deposit Scheme?

Since starting on 1 January, the banks have registered 3,000 potential first home buyers under the First Home Loan Deposit Scheme. The remaining 7,000 Scheme places for the current financial year will be available from 1 February 2020 when potential applicants will have a panel of 27 lenders to choose from. NHFIC is releasing 10,000 First Home Loan Deposit Scheme guarantees this financial year. Another 10,000 places will be available from July 2020. The Guarantee is not a cash payment or deposit for your home loan. How does First Home Loan Deposit Scheme work? Eligible first home buyers are able to obtain an eligible loan to purchase an eligible property through a participating lender with up to 15% of the value of the property guaranteed by NHFIC. To find the eligibility criteria please use the following link:  https://www.nhfic.gov.au/media/1701/first-home-loan-deposit-scheme-fact-sheet-1-july-2021.pdf

• Australian citizens who are least 18 years old.

• Singles with a taxable income of up to $125,000 per year or couples with taxable income of up to $200,000 per year (incomes would be assessed for the financial year preceding the one in which the loan is entered into).
• Couples are only eligible for the scheme if they are married or in a de-facto relationship. So other people such as siblings, a parent and child or two friends buying together would not be eligible for the Scheme.

• Applicants must have a deposit of at least 5% – but no more than 20% – of the property’s value.

• Loans under the Scheme normally require scheduled repayments of the principal (as well as the interest) of the loan for the full period of the home loan contract. However, if the loan relates both to the purchase of vacant land to the construction of a house on the land, the loan may be eligible even if the terms of the loan agreement permit interest-only repayments for a specified period.
• Loans are only eligible for the scheme if they’re for the purchase of a ‘residential property’. The NHFIC recommends asking your lender if you’re in doubt as to whether the property you’re buying is considered residential.
• Applicants must intend to move into and live in the property as their principal place of residence, typically within six months of settlement (so they must be owner-occupiers, not investors). They must also continue to live in the property for as long as their loan “has a guarantee under the Scheme”.
• Applicants must be first home buyers who have not previously owned or had an interest in a residential property, either on their own or jointly with someone else (this includes body corporate and company-owned properties, regardless of whether it was an investment or owner-occupied property and whether it was ever lived in).

Advantages of the First Home Loan Deposit Plan

The First Home Loan Deposit Scheme offers several benefits for first-time buyers:

• Reduced Costs: By eliminating the need for LMI, the scheme significantly reduces the upfront costs of buying a home.
• Lower Deposit Requirement: You can enter the property market with a deposit as low as 5%, making homeownership more accessible.
• Faster Homeownership: With a lower deposit requirement, you can save for a shorter period and buy your home sooner.
• Government Support: The government’s guarantee provides additional security and peace of mind for both borrowers and lenders.

Tips for Making the Most of the First Home Loan Deposit Scheme

Here are some expert tips to help you take full advantage of the First Home Loan Deposit Scheme:

1. Save Diligently

Although the scheme allows you to buy a home with a 5% deposit, saving as much as possible will give you greater financial stability and reduce your overall loan amount. Aim to save more than the minimum required deposit to cover additional costs such as stamp duty, legal fees, and moving expenses.

2. Understand the Price Caps

Each state and territory has different price caps for properties under the scheme. Research these caps to ensure the property you are interested in falls within the allowable limits. This will help you narrow down your search and focus on eligible properties.

3. Seek Professional Advice

Navigating the home loan process can be complex. Consider seeking advice from a mortgage broker who can help you understand the First Home Loan Deposit Scheme and find the best loan options for your situation.

4. Get Pre-Approval Early

Getting pre-approval early in your home buying journey will give you a clear understanding of your borrowing capacity and help you act quickly when you find the right property. It also demonstrates to sellers that you are a serious and prepared buyer.

5. Monitor Your Credit Score

Getting a house loan is largely dependent on your credit score. Ensure your credit report is accurate and take steps to improve your score by paying bills on time and reducing existing debts. If you are seeking for help in loan matters then Loans and Mortgages can assist you with your personal finances including your home loan, car loan and insurances. We pride ourselves on being the most trusted and experienced mortgage servicing company in Australia offering services in New South Wales, Victoria, Queensland, Western Australia, South Australia, and Tasmania.