Have you been putting off buying your own home due to financial constraints? The First Home Loan Deposit Scheme can be the opportunity you’ve been waiting for to realise your dream of owning a home!
In this guide, I’m going to discuss everything you need to know about the First Home Loan Deposit Scheme.
What Is It? How Does It Work?
The First Home Loan Deposit Scheme (FHLDS) is an Australian Government program designed to help Australians purchase their first home. The FHLDS program allows low- and middle-income earners – who are first home buyers – to buy a house with only a 5% minimum deposit. Generally, mortgage lenders expect a 20% deposit for a home loan. Or, you have to pay the lender’s mortgage insurance, which in itself can cost thousands of dollars.
Under the FHLDS program, part of an eligible first home buyer’s loan from a Participating Lender will be guaranteed by the National Housing Finance and Investment Corporation (NHFIC). This allows first home buyers to purchase their first home with as little as a 5% deposit.
Key Features of the First Home Loan Deposit Scheme
The First Home Loan Deposit Scheme has the following key features.
| Commencement Date | The Scheme commenced on January 1, 2020.Applications to a Participating Lender to have your home loan covered by the FHLDS program can only be made on or after that date. |
| Participation in the FHLDS Program | You can’t apply directly to the NHFIC to have your loan participate in the FHLDS program. You can only do this as part of your home loan application with a Participating Lender.The eligibility of your home loan to participate in the FHLDS program will be deliberated by your lender and, if eligible, the lender will notify you that your home loan is able to participate. |
| Place Limits | Up to 10,000 home loans can be guaranteed under the FHLDS program in any financial year (ending June 30). On January 1, 2020, 10,000 places were released and these have all been reserved.From July 1, 2020 to June 30, 2021, an additional 10,000 places will become available. These may be released by the NHFIC to Participating Lenders in lots and places may not be available at a particular time if a lot is exhausted. Release of places in future financial years will be announced by the NHFIC at a later time. |
| Issue of Guarantees Under FHLDS | If your home loan is covered by the FHLDS, the NHFIC will issue a guarantee to the Participating Lender who made that loan to you.Note that the guarantee is not a deposit or cash payment for your home loan. Rather, the guarantee is a legal arrangement between your lender and the NHFIC to pay up to a certain amount that you owe to your lender if you default under the terms of your home loan and the property has been sold. |
Property Types
What types of properties can be bought under the First Home Loan Deposit Scheme? Under the FHLDS program, eligible first home buyers can buy the following property types:
- A house and land package
- An existing apartment, townhouse, or house
- A vacant land, along with a separate contract to build a house
- An off-the-plan townhouse or apartment
Once you’ve been pre-approved for a home loan by a Participating Lender, you’ll have 90 days to find and sign a contract of sale for an eligible property that you want to purchase.
Once you’ve signed a contract, you’ll have an additional 30 days from the signing date to finalise the paperwork for your home loan.
The Bottom Line
The First Home Loan Deposit Scheme (FHLDS) is designed to help Australians purchase their first home with as little as a 5% deposit.
So, if you’ve been putting off buying your own home due to financial constraints, the FHLDS may be the solution you’re looking for!
To learn more about the eligibility requirements and application process for the First Home Loan Deposit Scheme, read my article, “First Home Loan Deposit Scheme: Eligibility and Application”.
Will Bell Mortgage Broker is a mortgage and finance broker based in Melbourne specializing in residential home loans. Will is all about the average Australian understanding just enough of the broader economy to take action on your own personal economy. He is the host of the My Personal Economy Podcast which you can check out here.
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