Deposit scheme revisited: What you need to know

By Gerv Tacadena

The government has recently opened 10,000 more slots for the first home loan deposit scheme

It's round two for the federal government's First Home Loan Deposit Scheme (FHLDS), giving many Australians another chance to kickstart their homeownership journey.

The National Housing Finance and Investment Corporation (NHFIC) recently announced the opening of 10,000 more slots for the scheme, which allows homeowners to apply for a loan with as little as 5% deposit.

Announced last year, the FHLDS aims to provide support to first-home buyers who are struggling to come up with the typical 20% deposit requirement by lenders. An initial 10,000 slots were opened earlier this year.

Under the scheme, the government guarantees up to 15% of the home-loan deposit requirement. This means that even if you only have a 5% down payment, you will not be required to pay for lenders' mortgage insurance (LMI).

Beneficiaries of the scheme will receive support from the program for the life of the loan or until the mortgage is refinanced.

If you were unable to secure a spot in the first batch of applications and are planning to apply the second time around, here are the things you should know about the FHLDS:

Are you eligible for the scheme?

To be allowed to apply for the scheme, you must have an annual taxable income of no more than $125,000. If you have a spouse, your combined annual income should be less than $200,000 per year.

You must not have previously owned or had an interest in a property in Australia to be eligible. Furthermore, you should be applying as an owner-occupier — this means that you are intending to live in the property you are applying the scheme for.

Are all homes eligible?

If you find yourself eligible to apply for the scheme, the next thing you have to consider is the property you are targeting to buy.

Under the FHLDS, you can enter into a contract to buy an existing dwelling, get a house and land package or pursue an off-the-plan apartment or townhouse. You can also apply for the scheme if you plan to buy a land with a separate contract to build a home.

In terms of prices, the NHFIC has set thresholds, which depend on the state where the house is located. For eligible homebuyers in Sydney and Melbourne, price caps will be at $700,000 and $600,000, respectively. The respective thresholds for regional areas in New South Wales and Victoria are set at $450,000 and $375,000.

The table below shows the price caps imposed in each state, including their capital cities, regional centres, and regional areas:

Where can you apply?

The NHFIC has formed a panel of 27 lenders where you can apply for the grant alongside your home loan.

The National Australia Bank and the Commonwealth Bank of Australia are the two major banks included in the panel of financial institutions.

The other banks are enumerated below:

Major Banks:

Non-major Lenders:

What are some considerations?

When you apply for the scheme, your payments will be in principal and interest. If you are planning to get interest-only payments to lessen your monthly repayments over the first few years of your loan, then you will not be able to apply for the scheme.

You also have to consider that that given your low deposit, you are starting with a lower stake in your home. This can affect your chances of getting a better deal when you decide to refinance.

Before applying, consult with your mortgage broker about which lender has the appropriate home loan for your needs.

 

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