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.

State Capital city/regional centre – new cap Capital city/regional centre – previous cap Rest of state – new cap Rest 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 $500,000 N/A N/A
NT $550,000 $375,000 N/A N/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


Bank of Us

IBA Group

Qld Country Bank

Bendigo Bank

The Mutual

Regional Australia Bank

Commonwealth Bank


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


Teachers Mutual Bank

Beyond Bank

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How much are repayments on a $250K mortgage?

The exact repayment amount for a $250,000 mortgage will be determined by several factors including your deposit size, interest rate and the type of loan. It is best to use a mortgage calculator to determine your actual repayment size.

For example, the monthly repayments on a $250,000 loan with a 5 per cent interest rate over 30 years will be $1342. For a loan of $300,000 on the same rate and loan term, the monthly repayments will be $1610 and for a $500,000 loan, the monthly repayments will be $2684.

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A redraw facility attached to your loan allows you to borrow back any additional repayments that you have already paid on your loan. This can be a beneficial feature because, by paying down the principal with additional repayments, you will be charged less interest. However you will still be able to access the extra money when needed.

What is bridging finance?

A loan of shorter duration taken to buy a new property before a borrower sells an existing property, usually taken to cover the financial gap that occurs while buying a new property without first selling an older one.

Usually, these loans have higher interest rates and a shorter repayment duration.

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What is a fixed home loan?

A fixed rate home loan is a loan where the interest rate is set for a certain amount of time, usually between one and 15 years. The advantage of a fixed rate is that you know exactly how much your repayments will be for the duration of the fixed term. There are some disadvantages to fixing that you need to be aware of. Some products won’t let you make extra repayments, or offer tools such as an offset account to help you reduce your interest, while others will charge a significant break fee if you decide to terminate the loan before the fixed period finishes.

What happens to your mortgage when you die?

There is no hard and fast answer to what will happen to your mortgage when you die as it is largely dependent on what you have set out in your mortgage agreement, your will (if you have one), other assets you may have and if you have insurance. If you have co-signed the mortgage with another person that person will become responsible for the remaining debt when you die.

If the mortgage is in your name only the house will be sold by the bank to cover the remaining debt and your nominated air will receive the remaining sum if there is a difference. If there is a turn in the market and the sale of your house won’t cover the remaining debt the case may go to court and the difference may have to be covered by the sale of other assets.  

If you have a life insurance policy your family may be able to use some of the lump sum payment from this to pay down the remaining mortgage debt. Alternatively, your lender may provide some form of mortgage protection that could assist your family in making repayments following your passing.

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