First homebuyers struggling to save up enough for a home deposit may now be able to take advantage of the federal government’s First Home Loan Deposit Scheme, which became available on January 1 2020.
The scheme was introduced to help give first home buyers a leg up into the market, however there’s only 10,000 loans available each financial year.
So what is the scheme and how can it benefit you?
What is the First Home Loan Deposit Scheme?
In a nutshell, the new scheme allows eligible first home owners on low to middle incomes to purchase a home with as little as a 5% deposit. The government will provide a loan guarantee of up to 15% of the property’s value, which could save buyers from having to spend up to $10,000 on lenders’ mortgage insurance.
Who can apply?
Obviously, you need to be a first home buyer to take advantage of the scheme. If you are a single buyer you also need to have earned less than $125,000 in the last financial year, or less than $200,000 if you’re purchasing as a married or de-facto couple.
There are also property prices caps that apply to the scheme that vary depending on the location. A full list of eligibility criteria and property price caps can be found using the NHFIC’s online tool.
Are there risks with using the scheme?
As with any property purchase it’s up to buyers to do their own due diligence and work out whether or not any particular property is a suitable financial investment.
Buyers should also keep in mind that buying a property with a smaller deposit means that they will have a greater amount owing on their loan. This in turn means it will take borrowers longer to pay off their home loan than it would if they had a larger deposit, and that they will end up paying more interest overall.
However in areas where property prices are growing fast, or where you simply don’t want to wait any longer to get on the property ladder, the scheme can provide a helping hand with getting into the market quicker than you might otherwise be able to.
For all further details about the First Home Loan Deposit Scheme visit www.nhfic.gov.au/what-we-do/fhlds/.