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First home buyers can now apply for the government’s deposit scheme

First home buyers can now apply for the government’s deposit scheme

About 20 banks and financial institutions are now accepting applications to partially guarantee the deposit buyers would use to secure a mortgage on their first home.

The 10,000 applicants will be able to pick up a property with a deposit as small as 5 per cent, and they won’t have to worry about saving extra for lenders mortgage insurance (LMI), a fee usually charged on deposits below 20 per cent as the scheme guarantees the difference.

This is the second 10,000 quota to be guaranteed by the government this year, after an original batch opened up on 1 July. The additional placements are part of the government’s COVID-19 stimulus measures, together with HomeBuilder and JobKeeper.

“From today, first home buyers will be able to apply to First Home Loan Deposit Scheme lending panel lenders to secure a guarantee to build a new home or purchase a newly built home with a deposit of as little as five per cent,” Michael Sukkar said, minister for housing.

“These additional guarantees will … drive more construction and support jobs in the economy at a time it’s needed most.”

There’s 20 banks accepting applications for the First Home Loan Deposit Scheme from today, while a further seven will begin accepting applications from 9 November. (The full list of banks and financial institutions participating in the scheme can be found at the bottom of this article.)

New conditions require budding buyers to snap up new or newly built homes, but there’s also been a lift in the pricing caps for major cities.

Sydney and Melbourne’s caps increased by $250,000 to $950,000 and $850,000 respectively, while Brisbane’s increased by $175,000 to $650,000.

StateCapital city/regional centre – new capCapital city/regional centre – previous capRest of state – new capRest of state – previous cap
NSW$950,000$700,000$600,000$450,000
VIC$850,000$600,000$550,000$375,000
QLD$650,000$475,000$500,000$400,000
WA$550,000$400,000$400,000$300,000
SA$550,000$400,000$400,000$250,000
TAS$550,000$400,000$400,000$300,000
ACT$600,000$500,000N/AN/A
NT$550,000$375,000N/AN/A

Source: Federal Government

First home buyers signed a third of last month’s mortgages

First home buyers are accounting for a larger proportion of new mortgage commitments, data from the Australian Bureau of Statistics (ABS) reveals.

There were 13,040 first home buyer loan commitments in September, according to seasonally adjusted data, an increase of 6 per cent.

But this accounted for 34.5 per cent of all owner occupier commitments for the month, Amanda Seneviratne said, head of finance and wealth at the ABS.

“Owner occupier housing loan commitments are at historically high levels, consistent with low interest rates and government incentives,” she said.

Housing Minister Michael Sukkar said the increase had pushed the number of first home buys to a long forgotten high.

“... First home buyers are flooding into the housing market, with the number of loans to first home buyers reaching the highest number in over a decade,” he said.

Another government scheme accounted for an even greater share of new mortgages. The ABS said the government’s Homebuilder scheme accounted for about half of the $17.3 billion spent on owner occupier loans.

First home buyers can also take advantage of the HomeBuilder scheme, provided they meet the eligibility criteria.

Buying into the market four years quicker

The government’s role in guaranteeing part of a 20 per cent deposit has helped first home buyers enter the market years earlier, according to a federal government agency.

The National Housing Finance and Investment Corporation’s (NHFIC) initial report into the first home loan deposit scheme found people were able to buy their first home four years earlier on average.

In New South Wales, it helped them shave five years.

This is because they can secure a home with a deposit one-quarter of the size, while also not having to save extra to cover LMI -- a tax paid to banks that can cost several thousand dollars.

There is a downside to buying a property with a smaller deposit, however. The interest being calculated on a bigger loan will ultimately result in more money being spent on servicing it, Sally Tindall said, research director at RateCity.

“For most lenders, a deposit that falls short of 20 per cent means you’ll have to fork out for LMI which can run well over $10,000,” she said.

“It also means your monthly repayments will be higher and you’ll pay more in interest over the life of your loan.”

Lenders accepting first home loan deposit applications from today

Australian Military Bank

Defence Bank

P&N Bank

Australian Mutual Bank

G&C Mutual

People’s Choice

Bank Australia

Gateway Bank

QBank

Bank of Us

IBA Group

Qld Country Bank

Bendigo Bank

The Mutual

Regional Australia Bank

Commonwealth Bank

MyState

WAW Credit Union

Community First

National Australia Bank

Lenders accepting first home loan deposit applications from 9 November 2020

Auswide Bank

Credit Union Australia

Police Bank

Bank First

Mortgageport

Teachers Mutual Bank

Beyond Bank

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

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Learn more about home loans

Can I get a NAB first home loan?

The First Home Loan Deposit Scheme of NAB helps first home buyers purchase a property sooner by reducing the upfront costs required. This scheme is offered based on a Government-backed initiative, with10,000 available places announced in October 2020.

Suppose your application for the NAB first home buyer loan is successful. In that case, you’ll only need to pay a low deposit, between 5 and 20 per cent of the property value and won’t be asked to pay lender's mortgage insurance (LMI). You’ll also receive a limited guarantee from the Australian government to purchase the property.

If you’re applying for the NAB first home buyer home loan as an individual, you need to have earned less than $125,000 in the last financial year. Couples applying for the NAB first home loan need to have earned less than $200,000 to be eligible. To be considered a couple, you need to be married or in a de facto relationship. A parent and child, siblings or friends are not considered a couple when applying for a NAB first home loan.

The NAB First Home Loan Deposit Scheme is currently offered only to purchase a brand new property, rather than an established property.

How can I apply for a first home buyers loan with Commonwealth Bank?

Getting a home loan requires planning and research. If you are considering a home loan with the Commonwealth Bank, you can find the information you need in the buying your first home section of the bank’s website.

You can see the steps you should take before applying for the loan and use the calculators to work out how much you can borrow, what your monthly repayments would be and the upfront costs you’d likely pay.

You can also book a time with a Commonwealth first home loan specialist by calling 13 2221.

CommBank publishes a property report that may help you understand the real estate market. The bank has also created a CommBank Property App that you can use to search for property.  The link to download this app is available on the same webpage.

If you are eligible for the First Home Loan Deposit Scheme, CommBank will help you process your application. The scheme helps first home buyers to purchase a home with a low deposit. You can read details about this scheme here and speak with a CommBank home lending specialist to understand your options.

Why does Westpac charge an early termination fee for home loans?

The Westpac home loan early termination fee or break cost is applicable if you have a fixed rate home loan and repay part of or the whole outstanding amount before the fixed period ends. If you’re switching between products before the fixed period ends, you’ll pay a switching break cost and an administrative fee. 

The Westpac home loan early termination fee may not apply if you repay an amount below the prepayment threshold. The prepayment threshold is the amount Westpac allows you to repay during the fixed period outside your regular repayments.

Westpac charges this fee because when you take out a home loan, the bank borrows the funds with wholesale rates available to banks and lenders. Westpac will then work out your interest rate based on you making regular repayments for a fixed period. If you repay before this period ends, the lender may incur a loss if there is any change in the wholesale rate of interest.

When does Commonwealth Bank charge an early exit fee?

When you take out a fixed interest home loan with the Commonwealth Bank, you’re able to lock the interest for a particular period. If the rates change during this period, your repayments remain unchanged. If you break the loan during the fixed interest period, you’ll have to pay the Commonwealth Bank home loan early exit fee and an administrative fee.

The Early Repayment Adjustment (ERA) and Administrative fees are applicable in the following instances:

  • If you switch your loan from fixed interest to variable rate
  • When you apply for a top-up home loan
  • If you repay over and above the annual threshold limit, which is $10,000 per year during the fixed interest period
  • When you prepay the entire outstanding loan balance before the end of the fixed interest duration.

The fee calculation depends on the interest rates, the amount you’ve repaid and the loan size. You can contact the lender to understand more about what you may have to pay. 

Can first home buyers apply for an ING home loan?

First home buyers can apply for an ING home loan, but first, they need to select the most suitable home loan product and calculate the initial deposit on their home loan. 

First-time buyers can also use ING’s online tool to estimate the amount they can borrow. ING offers home loan applicants a free property report to look up property value estimates. 

First home loan applicants struggling to understand the terms used may consider looking up ING’s first home buyer guide. Once the home buyer is ready to apply for the loan, they can complete an online application or call ING at 1800 100 258 during regular business hours.

What is a low-deposit home loan?

A low-deposit home loan is a mortgage where you need to borrow more than 80 per cent of the purchase price – in other words, your deposit is less than 20 per cent of the purchase price.

For example, if you want to buy a $500,000 property, you’ll need a low-deposit home loan if your deposit is less than $100,000 and therefore you need to borrow more than $400,000.

As a general rule, you’ll need to pay LMI (lender’s mortgage insurance) if you take out a low-deposit home loan. You can use this LMI calculator to estimate your LMI payment.

How much deposit do I need for a home loan from NAB?

The right deposit size to get a home loan with an Australian lender will depend on the lender’s eligibility criteria and the value of your property.

Generally, lenders look favourably on applicants who save up a 20 per cent deposit for their property This also means applicants do not have to pay Lenders Mortgage Insurance (LMI). However, you may still be able to obtain a mortgage with a 10 - 15 per cent deposit.  

Keep in mind that NAB is one of the participating lenders for the First Home Loan Deposit Scheme, which allows eligible borrowers to buy a property with as low as a 5 per cent deposit without paying the LMI. The Federal Government guarantees up to 15 per cent of the deposit to help first-timers to become homeowners.

How much deposit do I need for a home loan from ANZ?

Like other mortgage lenders, ANZ often prefers a home loan deposit of 20 per cent or more of the property value when you’re applying for a home loan. It may be possible to get a home loan with a smaller deposit of 10 per cent or even 5 per cent, but there are a few reasons to consider saving a larger deposit if possible:

  • A larger deposit tells a lender that you’re a great saver, which could help increase the chances of your home loan application getting approved.
  • The more money you pay as a deposit, the less you’ll have to borrow in your home loan. This could mean paying off your loan sooner, and being charged less total interest.
  • If your deposit is less than 20 per cent of the property value, you might incur additional costs, such as Lenders Mortgage Insurance (LMI).

How to apply for a pre-approval home loan from Bendigo Bank?

Applying for pre-approval on your home loan gives you confidence in your ability to secure finance while looking at potential new homes. You can get a free and personalised pre-approval home loan from Bendigo Bank in just a few minutes, without any credit checks or paperwork. 

Bendigo Bank offers pre-approval for home loans that allow you to understand the home loan size you may be able to get before looking for a new home. 

With the pre-approval, Bendigo Bank provides an estimate of your borrowing power. This figure incorporates stamp duty, lenders mortgage insurance (LMI) and any first home buyer incentives you may be eligible for. You may also qualify for the First Home Loan Deposit Scheme initiative, depending on your circumstances. 

To apply for a pre-approval on your home loan from Bendigo Bank, all you need to do is fill in a smart form. You could also contact the bank directly on 1300 236 344.

Where can I get all the information about an ANZ first home buyer’s loan?

As a first home buyer, you may require help and hand-holding, and as such ANZ has the buying your first home section on its website full of important information. ANZ also has a form in this section you can fill out to get a free consultation from an ANZ First Home Coach and create your own plan for buying your first home. This coach will help you understand where your current income is being spent and plan for your home loan repayments. You’ll get a clear picture of the costs involved in purchasing a property and how to budget or save for these costs. The coach will help you understand different deposit options and manage your accounts to enhance your savings.

There are three types of ANZ first home loans - Standard Variable, Fixed, and Equity Manager. The features, interest rates, and terms for each are different, and you can compare them here.

When they apply for an ANZ home loan, first home buyers can also get guidance on applying for the First Home Owner Grant (FHOG). This is a one-off government grant that may be available to you when you’re buying your first home. The eligibility criteria for FHOG differs between the different states and territories, which is why it’s helpful to have expert advice when applying.

What are the pros and cons of no-deposit home loans?

It’s no longer possible to get a no-deposit home loan in Australia. In some circumstances, you might be able to take out a mortgage with a 5 per cent deposit – but before you do so, it’s important to weigh up the pros and cons.

The big advantage of borrowing 95 per cent (also known as a 95 per cent home loan) is that you get to buy your property sooner. That may be particularly important if you plan to purchase in a rising market, where prices are increasing faster than you can accumulate savings.

But 95 per cent home loans also have disadvantages. First, the 95 per cent home loan market is relatively small, so you’ll have fewer options to choose from. Second, you’ll probably have to pay LMI (lender’s mortgage insurance). Third, you’ll probably be charged a higher interest rate. Fourth, the more you borrow, the more you’ll ultimately have to pay in interest. Fifth, if your property declines in value, your mortgage might end up being worth more than your home.

How do I apply for Westpac’s first home buyer loan?

If you’re a first home buyer looking to apply for a home loan with Westpac, they offer an online home loan application. They suggest the application can be completed in about 20 minutes. Based on the information you provide, Westpac will advise you the amount you can borrow and the costs associated with any possible home loan. 

You can use Westpac’s online mortgage calculators to estimate your borrowing power. You can also work out the time it might take to save up for the deposit, and the size of your home loan repayments

When applying for a home loan with Westpac, you’re assigned a home finance manager who can address your concerns and provide information. The manager will also offer guidance on any government grants you may be eligible for. 

Does Australia have no-deposit home loans?

Australia no longer has no-deposit home loans – or 100 per cent home loans as they’re also known – because they’re regarded as too risky.

However, some lenders allow some borrowers to take out mortgages with a 5 per cent deposit.

Another option is to source a deposit from elsewhere – either by using a parental guarantee or by drawing out equity from another property.

What are the features of home loans for expats from Westpac?

If you’re an Australian citizen living and working abroad, you can borrow to buy a property in Australia. With a Westpac non-resident home loan, you can borrow up to 80 per cent of the property value to purchase a property whilst living overseas. The minimum loan amount for these loans is $25,000, with a maximum loan term of 30 years.

The interest rates and other fees for Westpac non-resident home loans are the same as regular home loans offered to borrowers living in Australia. You’ll have to submit proof of income, six-month bank statements, an employment letter, and your last two payslips. You may also be required to submit a copy of your passport and visa that shows you’re allowed to live and work abroad.