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See who's been approved for the First Home Loan Deposit Scheme

See who's been approved for the First Home Loan Deposit Scheme

The government has approved 27 lenders, including National Australia Bank and Commonwealth Bank, to provide guaranteed home loans under the Coalition’s First Home Loan Deposit Scheme (FHLDS).

The program has been widely anticipated since its announcement before the Federal Election earlier this year, as it allows eligible First Home Buyers (FHBs) to purchase a home with a deposit as little as 5 per cent.

27 Lenders approved for new First Home Loan Deposit Scheme

The NHFIC has now approved 27 residential mortgage lenders to offer guaranteed home loans under the First Home Loan Deposit Scheme, starting early next year.

The non-major lenders will have access to no more than 5,000 of the 10,000 available guaranteed loans, yet with the big four taking such a large share of the current home loan pie, it seems the 25 non-major lenders may need to fight it out for the remaining 5,000 guarantees.

The two major lenders will also get a head start in the application process, with approval to offer loans from 1 January 2020. Non-major lenders on the other hand, will not be able to start submitting applications until 1 February 2020.

The 27 approved Australian lenders are:

  • National Australia Bank
  • Commonwealth Bank of Australia
  • 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
  • QBANK
  • 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

How does the First Home Loan Deposit Scheme work?

The FHLDS aims to give first time buyers, previously locked out of the housing market by high deposit amounts and costly LMI fees, the opportunity to get their foot on the property ladder.

Starting January 2020, approved lenders will enrol 10,000 FHBs each year into the scheme.

Applicants must be Australian citizens who are at least 18 years of age, and singles must prove they have a taxable income of under $125,000 per year, whilst couples must prove a taxable annual income of up to $200,000.

FHLDS helps first home buyers avoid LMI

In Australia, if you are unable to save a 20 per cent deposit, you typically have to pay Lenders Mortgage Insurance (LMI). This one-off insurance premium protects the lender from the potential loss that could occur if you default on your repayments.

The scheme has been widely anticipated as successful applicants don’t need to come up with a 20 per cent deposit, which means they can avoid paying costly Lenders Mortgage Insurance (LMI).

The FHLDS could end up saving you tens of thousands of dollars in LMI costs, particularly if you were previously considering adding your LMI fee onto your home loan.

How much does LMI really cost?

Adding LMI onto your home loan can increase your total debt by tens of thousands of dollars, yet it’s common practice in Australia, as if you don’t have the 20 per cent deposit for a home loan, it’s unlikely you have thousands of dollars in cash lying around to pay your LMI upfront.

The FHLDS could benefit many Australians trying to buy their first home, as they would not only avoid the LMI fee, but also the potential costly interest that comes with it.

Consider the following: you are unable to save the $18,000 LMI fee, so choose to add this onto your home loan. Your home loan is for a loan term of 30 years, with an interest rate of 4.5 per cent. As LMI incurs the same interest as your principal amount if added onto your loan, it would add an extra $14,833 in interest to your home loan debt over your 30-year loan term.

That’s almost as much as the LMI fee itself, and means the total cost of your LMI plus interest is $32,833.

How much will you have to save for a 5% deposit?

The First Home Loan Deposit Scheme has outlined certain property price thresholds for each state, and capital city.

Taking Sydney as an example, a $700,000 home would usually require the standard 20 per cent deposit of $140,000. However, if you were a successful applicant of the FHLDS you would only need a 5 per cent deposit of $35,000.

A 5 per cent deposit for a $700,000 home is substantially more affordable than a 20 per cent deposit, but can the statistically ‘average’ Australian afford it?

Can Australians realistically afford a 5% deposit?

Avoiding the need to save an extra $105,000 to get your foot on the property ladder and start building equity is nothing to be sneezed at. However, when looking at ABS data, it seems a 5 per cent deposit may still be unaffordable for the average Australian.

ABS data shows Australians earn an average of $88,492 per year.

If we take the average Australian earnings as the standard income, you would need to save 39% of your income to achieve a 5 per cent deposit in just one year. This also does not consider the fees associated with buying a home, including legal fees, establishment fees and stamp duty fees, that can cost you thousands of dollars.

Whilst it seems that the FHLDS is on track to provide FHBs with the boost they need to secure the home of their dreams, the potential inability to save a 5 per cent deposit, coupled with the fact that only 10,000 guarantees are on offer each year, would this be enough to cover the demand across the country?

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Fact Checked -

This article was reviewed by Finance Writer Alison Cheung before it was published as part of RateCity's Fact Check process.

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Learn more about home loans

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 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.

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.

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.

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 much of a deposit do I need for a home loan from the Commonwealth bank?

The minimum deposit the Commonwealth Bank usually accepts is 10 percent of the amount you wish to borrow. However, a deposit of at least 20 percent of the amount you’re borrowing is needed if you wish to avoid Lenders Mortgage Insurance (LMI). LMI is charged for smaller deposits to give the lender extra recourse if the borrower fails to repay their loan. 

As an alternative to LMI, some borrowers with smaller deposits may opt to pay the Commonwealth Bank’s low deposit premium fee. It is a one-time, non-refundable charge that is added to a low-deposit home loan.

The deposit and the loan amounts are used to determine the LDP -, the higher the deposit, the lower is this cost. 

When calculating how much you need to save, don’t forget to factor in other expenses like stamp duty, insurance, legal fees, and moving costs.

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.

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.

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.

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.

Who offers 40 year mortgages?

Home loans spanning 40 years are offered by select lenders, though the loan period is much longer than a standard 30-year home loan. You're more likely to find a maximum of 35 years, such as is the case with Teacher’s Mutual Bank

Currently, 40 year home loan lenders in Australia include AlphaBeta Money, BCU, G&C Mutual Bank, Pepper, and Sydney Mutual Bank.

Even though these lengthier loans 35 to 40 year loans do exist on the market, they are not overwhelmingly popular, as the extra interest you pay compared to a 30-year loan can be over $100,000 or more.

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.

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. 

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.