New First Home Loan Deposit Scheme explained

Australia’s re-elected Coalition Government took a new first-home loan deposit scheme to the election.

Here’s a breakdown of how the proposed scheme works and how it could help you if you’re on the cusp of buying your first home. 

What is the First Home Loan Deposit Scheme? 

A common roadblock to buying a first home is saving enough of a deposit (typically around 20 per cent) to get your foot in the door. 

The First Home Loan Deposit Scheme addresses this challenge by reducing that amount to only five per cent – with the government guaranteeing a further 15 per cent of the loan on behalf of the new buyer.

The value of homes that can be purchased under the Scheme will be determined on a regional basis, reflecting the value of the local market.

The government plans to borrow $500m of equity through the National Housing Finance and Investment Corporation to guarantee the loans. They would preference smaller banks and non-bank lenders to help boost competition.

Who is eligible?

The scheme is capped at 10,000 loans each year, with applications considered on a first come, first served basis.

Singles earning up to $125,000 and couples earning up to $200,000 will be eligible for the Scheme if they can show they have saved five per cent of the value of the home they wish to buy.

Standard loan application criteria would also apply (e.g. the applicants must show they have the capacity to support regular repayments and be in good credit standing). Only owner-occupiers will be permitted to apply.

Read more: 4 ways to get on the property ladder

How does it help?

The Scheme can help first timers get that foot in the door faster, by allowing them to act with less money in the bank.

It also stands to save first-home buyers up to $10,000 in Lenders Mortgage Insurance that they’d otherwise need to pay when purchasing with a deposit of less than 20 per cent of the property value.

The Scheme is expected to work in tandem with existing grants – for example, if you are eligible for a first home buyers grant, you’ll be able to receive this in addition to the deposit boost. 

When does it start?

The new Scheme is scheduled to commence on January 1, 2020. It has yet to be fully costed and confirmed.

Families or singles considering a move into home ownership can start saving now to take advantage of the Scheme.

If you'd like to assess your first-home readiness, book a time to chat with our finance experts.