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What is the First Home Loan Deposit Scheme?

The First Home Loan Deposit Scheme (FHLDS) is a program from the federal government’s National Housing Finance and Investment Corporation (NHFIC). The Australian government initiative is designed to support Australian first home buyers by allowing them to purchase property with a deposit of just 5%, and without having to pay for Lender’s Mortgage Insurance (LMI).

It is one of the three key schemes offered by the NHFIC to assist struggling homebuyers purchase a property sooner:

  1. First Home Loan Deposit Scheme - Buy your first home sooner with a deposit of as little as 5%.
  2. New Home Guarantee - Build or buy a new home with a deposit of as little as 5% (higher property price caps may be available)
  3. Family Home Guarantee - Supports eligible single parents with at least one dependent child to purchase a home with a deposit of as little as 2%.

How can the First Home Loan Deposit Scheme help you?

The First Home Loan Deposit Scheme is designed to assist Australian first home buyers in getting a foot on the property ladder, by helping to minimise the up-front costs of their first home loan. For many first home buyers, saving a 20% deposit for a home or a unit is difficult, particularly in capital cities such as Sydney and Melbourne where property prices are high. Saving a 10% or 5% deposit may be easier, but the smaller your deposit, the more you may need to pay in LMI.

LMI is charged to borrowers when the applicant has a deposit under 20%, or a loan-to-value ratio (LVR) of over 80%. With the help of the FHLDS, the government acts similarly to a guarantor, supporting a first home buyer’s application by guaranteeing up to 15% of the property value, so that borrowers may avoid this costly charge. Further, your chances of approval for a home loan may increase as lenders are more likely to lend to applicants that have enough savings to avoid LMI.

Note, the FHLDS is not a loan and you will still need to repay the entirety of your mortgage, regardless of how much of your home loan the FHLDS guarantees.

Who is eligible for the First Home Loan Deposit Scheme?

Whether or not you may be eligible for the FHLDS depends on your location and status. Here are the key eligibility criteria for the scheme:

  • Applicants must be an Australian citizen over 18 years of age
  • Applicants must have not bought property before.
  • Taxable income must be under a maximum of $125,000 per annum (a combined $200,000 for couples) according to your ATO Notice of Assessment.
  • Must apply for a mortgage from one of a limited number of participating lenders in Australia.

For more information on what is and isn't covered by the FHLDS, you can visit the NHFIC website for a fact sheet.

What types of properties can you buy under the FHLDS?

According to the NHFIC, the FHLDS can be used to purchase a new home or an established property, with eligible residential properties including:

  • “An existing house, townhouse or apartment;
  • A house and land package;
  • Land and a separate contract to build a home; and
  • An off-the-plan apartment or townhouse.”

Property price caps may vary by postcode, with different purchase price caps for capital cities and regional centres. Applicants must also apply as an owner-occupier, as the scheme is not eligible for investors.

To be eligible for the FHLDS, whether you're purchasing a new home or an existing property, your purchase will need to fall under the property price threshold for its area.

Region FY2021-2022

FHLDS & Family Home Guarantee Price Cap ($AUD) effective 1 July 2021

NSW - capital city, regional centres (Newcastle, Lake Macquarie & Illawarra)$800,000
NSW – other$600,000
VIC – capital city, regional centre (Geelong)$700,000
VIC – other$500,000
QLD – capital city, regional centres (Gold Coast & Sunshine Coast)$600,000
QLD – other$450,000
WA – capital city$500,000
WA – other$400,000
SA – capital city$500,000
SA – other$350,000
TAS – capital city$500,000
TAS – other$400,000
Northern Territory$500,000
Jervis Bay Territory & Norfolk Island$550,000
Christmas Island & Cocos (Keeling) Island$400,000

Note: According to the NHFIC:

"The capital city price caps apply to large regional centres with a population over 250,000 (the Gold Coast, Newcastle and Lake Macquarie, the Sunshine Coast, Illawarra (Wollongong) and Geelong), recognising that dwellings in large regional centres tend to be significantly more expensive than other regional areas."

How do you apply for the First Home Loan Deposit Scheme?

If you’re considering applying for the FHLDS, here are the steps you will take:

  1. Check if you’re eligible: You can use the NHFIC eligibility tool to find out if you fulfil the lending criteria to apply for a place in the scheme.
  2. Check your finances: Not only must you save at least a 5% deposit for a property that fulfils the scheme’s eligibility requirements, your financial situation must meet the lender’s eligibility criteria. Can your, and any other applicants’, income comfortably service the mortgage, including meeting the monthly repayments at the current interest rate or higher?  
  3. Compare participating lenders: There are currently 34 lenders participating in the FHLDS (list below). Compare mortgage options to work out which home loan may best suit your needs.
  4. Contact your selected lender: Apply for your home loan through the FHLDS by contacting a participating lender directly. Unfortunately, RateCity and NHFIC can’t accept applications directly.
  5. Complete the lender’s application process: You’ll need to fulfil the lender's eligibility criteria when you enquire about a home loan, and provide the necessary documentation, including proof of income, proof of identity and proof of residence.

Do you have to be an Australian citizen to apply?

Currently, the First Home Loan Deposit Scheme is only available to Australian citizens. The scheme is not open for permanent residents who are not Australian citizens, nor is it available to those on working visas, such as the 457 Visa.

If you are applying as a couple, both applicants must be Australian citizens at the time of applying for the scheme.  

How much do you need to save before applying for the FHDLS?

Before applying for the FHLDS, you will need to save a property deposit of at least 5% to qualify.

You will also need to factor in savings to cover the additional costs associated with buying a home or applying for a mortgage, including:

  • Stamp duty (if applicable),
  • Transfer fees,
  • Legal and conveyance fees,
  • Valuation fees,
  • Home and contents insurance,
  • Moving fees, and
  • Home loan application fees (if applicable).

Can the First Home Loan Deposit Scheme be used with other grants?

Depending on your personal financial situation, you may be able to use the FHLDS in conjunction with other grants, concessions, and incentives, available from the federal and state/territory governments, as well as from individual mortgage lenders.

  • First Home Owner Grants (FHOGs): These programs from the state and territory governments may allow eligible first home buyers to claim thousands of dollars to go towards their first home loan deposit.
  • Stamp duty concessions and exemptions: Some state and territory governments may discount or waive the cost of stamp duty for first home buyers, depending on the property they’re buying.
  • First Home Super Saver Scheme (FHSSS): This scheme from the Australian Taxation Office (ATO) allows you to make extra contributions into your super fund, and withdraw up to $10,000 ($20,000 for couples) of these contributions to put towards your home deposit. By securely saving your money in your super fund, you make it almost impossible to spend this money on anything other than its intended purpose.
  • Cashback deals: Some mortgage lenders offer cashback rewards and incentives to encourage new borrowers to sign up with them. This money can prove useful for balancing your budget, especially in the first few months of a mortgage.

What alternatives are there to the First Home Loan Deposit scheme?

There are a range of government property buyer schemes available, specifically designed to help first home buyers get into the property market, such as the First Home Super Saver Scheme mentioned above.

Other schemes available from the NHFIC include:

  • The Family Home Guarantee- available to single parents to assist them in gaining home loan approval with a deposit as little as 2%.
  • The New Home Guarantee (NHG) - geared towards borrowers looking to purchase a newly built dwelling, or build a dwelling, with a deposit as little as 5%.

For a comprehensive look at all the available schemes for first home buyers, as well as a list of exactly what FHOG’s and stamp duty concessions or exemptions are available in your state or territory, please read our comprehensive guide.

You may also want to consider applying for a home loan with a traditional guarantor to bolster your application – typically a family member. By having a home loan guarantor to support your full mortgage, or just your deposit, you may be able to not only qualify for a home loan but borrow up to 110% of the property value, in some instances.

Fact Checked

This article was reviewed by Personal Finance Editor Mark Bristow before it was published as part of RateCity's Fact Check process.

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