What you need to know about the First Home Loan Deposit Scheme

First Home Buyers Scheme

What is the FHLDS?

The First Home Loan Deposit Scheme is an initiative by the Australian Government to help eligible first home buyers enter the property market sooner.

It is designed to assist first home buyers who have saved at least 5% of the property value to get a loan without paying Lenders Mortgage Insurance (LMI). It does this by guaranteeing the lender the additional 15% funds required to reach a 20% deposit for a home loan.

Typically if a buyer does not have 20% deposit or more, they would have to pay additional thousands in LMI. The FHLDS helps first home buyers avoid LMI costs by essentially working as a guarantor for the loan.

The initiative is not a cash payment to the buyer, but rather a guarantee to the lender. In the event the buyer cannot repay the loan, the government guarantees that it will pay the lender the agreed amount (up to 15% as outlined by the scheme).  An approved FHLDS guarantee stays in place for the life of the loan, or until the borrower decides to refinance to another loan or lender.

The guarantee offers 10,000 loans each financial year. The National Housing Finance and Investments Corporation (NHFIC) has announced that given the scheme’s launch mid 19-20 FY, another 10,000 loans under the FHLDS will be available from July 2020.

Can any first home buyer apply?

The 10,000 places are offered on a first-in-best-dressed basis to eligible applicants nationally. Eligibility requirements include:

  • Australian citizens who are 18 years or older.
  • Single applicants with a taxable income of up to $125,000 or couples with combined taxable income of $200,000 annually.
  • Only couples in a married or de facto relationship may qualify – dual applicants including siblings, two friends, or a parent and child buying would not qualify.
  • For dual applicants, both must be first home buyers.
  • The buyer/s must have saved at least 5% and no more than 20% of the property value to qualify.
  • The purchase must be toward a principal place of residence (where the borrowers move in within 6 months of purchase) and on principal and interest loan repayments. Purchases for investment purposes are not considered under the scheme.

Standard lending criteria and lender policies also apply.

The NHFIC has a handy eligibility quiz if you’re still not sure whether you may qualify. Check it out here.

The FHLDS can be used in conjunction with other First Home Buyer benefits, such as the state or territory first home buyer grants, stamp duty concessions and the First Home Loan Super Saver Scheme. You can find out which benefits you may be eligible for using our calculator.

What types of properties can applicants buy on the FHLDS?

Unlike the state or territory first home owner grant, which is restricted to newly build properties, the FHLDS can be applied to

  • An existing house, townhouse or apartment
  • An off-the-plan townhouse or apartment
  • A house and land package
  • Land with separate contract to build a house ^

Interest Only repayment exceptions can be made as per construction loan structure.

Property price caps

Price caps also apply on properties depending on the state and region of purchase. The caps reflect the median property prices in the respective area, ensuring the scheme can be applied only to entry-level homes.

You can confirm your suburb’s price cap on the NHFIC website.

Price caps apply depending on your region. Source: NHFIC

Source: NHFIC website.

Who offers the FHLDS?

From 1 January 2020, 27 lenders can offer the FHLDS including 2 major banks and 25 smaller lenders.

According to the NHFIC:

Major bank lenders which will be opening FHLDS applications from 1 January, 2020, are:

  • National Australia Bank
  • Commonwealth Bank

Non-major lenders which will be opening FHLDS applications from 1 February, 2020, are:

  • Australian Military Bank
  • Auswide Bank
  • Bank Australia
  • Bank First
  • Bank of us
  • Bendigo Bank
  • Beyond Bank Australia
  • Community First Credit Union
  • CUA
  • Defence Bank
  • Gateway Bank
  • G&C Mutual Bank
  • Indigenous Business Australia
  • Mortgageport
  • MyState Bank
  • People’s Choice Credit Union
  • Police Bank (including the Border Bank and Bank of Heritage Isle)
  • P&N Bank
  • Queensland Country Credit Union
  • Regional Australia Bank
  • Sydney Mutual Bank and Endeavour Mutual Bank (divisions of Australian Mutual Bank Ltd)
  • Teachers Mutual Bank Limited (including Firefighters Mutual Bank, Health Professionals Bank, Teachers Mutual Bank and UniBank)
  • The Mutual Bank
  • WAW Credit Union

Does a higher interest rate apply?

According to the NHFIC, interest rates will not change for buyers under the scheme.

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