The Australian Government recently announced the introduction of a First Home Loan Deposit Scheme to support eligible first home buyers to purchase a home faster. If you’re a first home buyer looking to get your foot in the door of the property market in the new year, we’ve got a quick summary of the Scheme and the eligibility criteria.
What is the First Home Loan Deposit Scheme?
The First Home Loan Deposit Scheme has passed the Senate and is now law, meaning it is expected to start on January 1, 2020 and will be administered by the National House Finance and Investment Corporation (NHFIC). While applications for the Scheme are not open yet, it has been introduced to support eligible first home buyers in a low and middle income bracket with as little as a 5% deposit saved purchase a home sooner. The Scheme is expected to support up to 10,000 loans per financial year, starting from 2020 and will apply to owner-occupied loans on a principal and interest basis. The government guarantee lasts until the homeowner refinances their home loan.
Am I Eligible?
Applicants under the Scheme will be subject to eligibility criteria relating to income thresholds. For single purchasers, it’s anticipated that the income threshold will be up to $125,000 per annum, and up to $200,000 combined for couples. These thresholds will be based on applicants’ income from the financial year preceding the financial year the loan is entered into. Applicants much be 18 years of age or older, and all purchasers of the house or land cannot have previously owned an interest in land in Australia which had a residence on it before July 1, 2000.
If you have saved 5% of the purchase price of your property, the government will guarantee the remaining 15% of the deposit. This means that while you still need to borrow the remaining 95% of your home’s purchase price, you won’t need lenders mortgage insurance, which can be a hefty amount on top of your deposit that must come directly from purchasers. This will allow first home buyers to purchase sooner, being able to save just 5% in a much shorter amount of time than having to wait to save the full 20% deposit. When applying for the Scheme, remember it is not available for investment properties, so you must occupy the home as your principal place of residence within twelve months of the construction or purchase of the home, for a minimum period of twelve continuous months.
Property Price Criteria
The Scheme will also have property price threshold criteria for each state and territory, which will ensure the scheme is only available for the purchase of modest homes, or the purchase of land and the subsequent construction of a modest home. The property price thresholds will differ depending on the location of the house or land being in either a capital city, or in the rest of the state or territory in a large regional area where the population exceeds 250,000 people. The NHFIC has developed a tool to help first home buyers search for anticipated property price thresholds in the suburbs in which they’re interested in purchasing a home.
If you’re gearing up to purchase your first home, or land to build a home on in the new year, you may be eligible for the First Home Loan Deposit Scheme to assist you in buying your first home sooner than you thought. Visit the Hotondo Homes website today and browse the First Home Buyers section, where you’ll find a wealth of information to help you through the process of purchasing your first home.
Hotondo Homes is not a registered financial advisory and therefore we recommend you speak to your financial advisor or mortgage broker to receive expert advice before entering into a real estate contract of sale.