The Government’s New First Home Loan Deposit Scheme Will Help First Home Buyers Purchase Sooner

On 1 January 2020 the Australian Government introduced  the First Home Loan Deposit Scheme (FHLDS) with the aim of assisting first home buyers to become home owners sooner.

What is the FHLDS?

The FHLDS is not a cash deposit made to the buyer.  Instead, under the FHLDS the Government guarantees the difference between the eligible first home buyer’s deposit (which must be at least 5%) and 20% of the value of the eligible property. This allows first home buyers to purchase their home with a deposit as little as 5% and without having to pay mortgage insurance, making it a more achievable goal for them.

The FHLDS will support up to 10,000 first home guarantees each financial year. The first 10,000 guarantees became available on 1 January 2020 and another 10,000 guarantees will be available from 1 July 2020.

Am I Eligible for the FHLDS?

You can only apply for the FHLDS through participating lenders. The Commonwealth Bank and the National Australia Bank have been offering loans with the FHLDS since 1 January 2020 and the remaining 25 lenders will begin from 1 February 2020.

The FHLDS also has a number of borrower, property and loan eligibility criteria:

An applicant borrower must:

  • be a first home buyer who has never owned land in Australia – either alone or with someone else;
  • move into the property as their principal place of residence within 6 months of settlement and continue to live in it for as long as it has a guarantee under the FHLDS;
  • be an Australian citizen over 18 (permanent residents are not eligible);
  • meet the taxable income thresholds:
    • an income of no more than $125,000 for the previous financial year for individuals, and
    • a combined income of no more than $200,000 for couples who are married or in a de-facto relationship); and
  • have a deposit of between 5% and 20%.

To be eligible the property must:

  • be a residential property (noting this term has a particular definition under the FHLDS);
  • have a purchase price under the cap for its location:
    • $475,000 for Brisbane, the Gold Coast and the Sunshine Coast, and
    • $400,000 for the remainder of Queensland; and
  • be an established dwelling or a new build dwelling that is purchased under a house and land package, a land and separate build contract or an off the plan arrangement (noting there are different Contract and settlement date requirements for each type of property).

To be eligible the loan must:

  • be made by a participating lender;
  • be secured by a first registered mortgage over the eligible property (and the eligible borrower must be the only owner at settlement);
  • have 100% of the loan drawdown proceeds used for the purchase or construction of the eligible property;
  • require regular principal and interest repayments (although some exemptions may allow for interest only repayments during the construction of a new dwelling);
  • not allow for changes to loan terms (such as an increased limit);
  • cover finance for both land and construction (in the case of vacant land); and
  • have a term of 30 years or less.

How do I apply for the FHLDS, and can I still apply for other government assistance schemes?

You must apply for the FHLDS directly through an approved lender (or broker with relations to an approved lender) as the Government does not accept applications.

The FHLDS does not affect your ability to apply for other Government schemes such as the First Home Owner’s Grant.

If you would like further information on the FHLDS or need any assistance in relation to the purchase of your home please contact our team at Smart Move Conveyancing on 07 4616 9888

This publication has been carefully prepared, but it has been written in general terms and should be viewed as a broad guidance only.  It does not purport to be comprehensive or to render advice.  No one should rely on the information contained in this publication without first obtaining professional advice relevant to their own specific situation.