New first home loan government scheme limited to new homes, price caps hiked

New first home loan government scheme limited to new homes, price caps hiked

The First Home Loan Deposit Scheme (FHLDS) has been expanded with increased property price thresholds, but buyers are limited to new-build homes.

The federal government has topped up the scheme with an additional 10,000 places from today until mid-2021, though first home buyers accessing the new version of the scheme will only be able to buy a new home or a newly built home.

First home buyers will also be able to choose from a wider range of homes, with the government increasing the property price thresholds of the updated scheme.

Sydney-siders can expect to receive assistance for buying a home valued at a maximum of $950,000, while Melbournians could be supported with a property purchase of up to $850,000. This represents a $250,000 hike from the previous $700,000 and $600,000 respectively.

Those buying in Brisbane may also bump up their budget by $175,000, with the new price cap lifted to $650,000 from $475,000.

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

Under the national scheme, eligible first home buyers can purchase a property with a minimum deposit of 5 per cent without being charged lenders’ mortgage insurance (LMI). A 20 per cent deposit is usually required to avoid LMI costs, which may set buyers back by up to tens of thousands. The federal government guarantees the shortfall in the required deposit.

 

Most first home buyers want to buy existing homes

However, the Real Estate Institute of Australia’s (REIA) president Adrian Kelly said the scheme’s new rules disregard what first home buyers are looking for, claiming that more than 80 per cent are purchasing established homes.

“In more recent times even fewer small home buyers are choosing new dwellings,” he said.

“First home buyers in lower value established homes also usually embark on a program of home improvement and renovation providing a stimulus to the building sector.”

Three quarters of first home buyers in Australia have less than a 20 per cent deposit, REIA said, forcing many to stump up LMI.

“It would have been far better to not limit the additional places to new builds in terms of the economic impacts and first home buyer preferences,” Mr Kelly said.

Housing Industry Association managing director Graham Wolfe said limiting the FHLDS to those buying a new home “will support jobs in the residential building industry”.

Master Builders Australia chief executive officer Denita Wawn agreed.

“Thousands of small builders and tradies are staring down the barrel of destruction. This move by the government is going to help save jobs and keep businesses afloat,” she said.

Boosting home ownership and residential building activity are among the most effective ways to fire up aggregate demand, which is exactly what we need right now.”

Over-borrowing concerns

Concerns about exposing first home buyers to a higher level of debt, amid the recent removal of responsible lending obligations, have also been raised.

Despite the government guarantee, a first home buyer accessing the FHLDS with a 5 per cent deposit would be borrowing 95 per cent of the property price. 

AMP Capital’s chief economist Shane Oliver said while government measures, such as repealing responsible lending rules, were designed to help support the property market, some home buyers could face the risk of over-borrowing. 

“The risk is that it just drives even more people into lots more debt and a possible eventual oversupply of homes given the hit to immigration,” he said.

First Home Loan Deposit Scheme places tipped to be snapped up

Both rounds of the FHLDS have been close to booked out, with almost 20,000 first home buyers applying for a spot this year, according to a joint statement from Treasurer Josh Frydenberg and minister for housing Michael Sukkar.

“The government recognises that saving a deposit has become a more significant barrier to entering the housing market than the ability to service a home loan,” the statement said.

It noted that the additional places “will drive more construction and support jobs as part of (the federal government’s) economic recovery plan”.

Mr Sukkar said on Saturday that he expects the take-up of the new FHDLS to be popular, despite the recession.

“The first two tranches have been fully subscribed, there’s obviously resilience in the market, there are people who feel confident enough to do it and we’re facilitating that,” he said.

“So I’d expect for this 10,000 tranche of First Home Loan Deposit Scheme guarantees, that we’ll have no problems with people wanting to take them up very enthusiastically.”

Twenty-seven mortgage lenders, including big four banks NAB and Commonwealth Bank, across Australia are providing government-guaranteed home loans under the scheme. 

NAB said it has 4,500 first home buyers taking out a home loan with them through the scheme.

Did you find this helpful? Why not share this news?

Fact Checked -

This article was reviewed by Senior Journalist Tony Ibrahim before it was published as part of RateCity's Fact Check process.

Advertisement

RateCity
ratecity-newsletter

Money Health Newsletter

Subscribe for news, tips and expert opinions to help you make smarter financial decisions

By signing up, you agree to the RateCity Privacy Policy, Terms of Use and Disclaimer.

Advertisement

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.

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 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.

Cash or mortgage – which is more suitable to buy an investment property?

Deciding whether to buy an investment property with cash or a mortgage is a matter or personal choice and will often depend on your financial situation. Using cash may seem logical if you have the money in reserve and it can allow you to later use the equity in your home. However, there may be other factors to think about, such as whether there are other debts to pay down and whether it will tie up all of your spare cash. Again, it’s a personal choice and may be worth seeking personal advice.

A mortgage is a popular option for people who don’t have enough cash in the bank to pay for an investment property. Sometimes when you take out a mortgage you can offset your loan interest against the rental income you may earn. The rental income can also help to pay down the loan.

When do mortgage payments start after settlement?

Generally speaking, your first mortgage payment falls due one month after the settlement date. However, this may vary based on your mortgage terms. You can check the exact date by contacting your lender.

Usually your settlement agent will meet the seller’s representatives to exchange documents at an agreed place and time. The balance purchase price is paid to the seller. The lender will register a mortgage against your title and give you the funds to purchase the new home.

Once the settlement process is complete, the lender allows you to draw down the loan. The loan amount is debited from your loan account. As soon as the settlement paperwork is sorted, you can collect the keys to your new home and work your way through the moving-in checklist.

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.

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.

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.

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 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 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.

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. 

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.