In the past, one of the biggest hurdles facing prospective first home buyers has been getting a 20% deposit together in order to avoid having to pay expensive lenders’ mortgage insurance. But on 1st January 2020, that may have just changed for many Australians with the introduction of the First Home Loan Deposit Scheme.
How does it work?
The scheme is designed to guarantee up to 15% of a property’s value, thus helping home buyers meet the 20% deposit guarantee usually required to avoid paying mortgage insurance. It also takes the burden off parents of many first home buyers, who would otherwise stump up the guarantee and put their own assets at risk.
The scheme is not a cash payment or a grant, but simply a guarantee to the lender in case of default.
Who is eligible? What is eligible?
There are three eligibility criteria that must be achieved to access the scheme: borrower, property and loan eligibilities. Amongst other things, these stipulate that:
– the borrower must be a first home buyer, earn less than $125k pa for a single or $200k pa as a couple, and be an Australian citizen (the borrower criteria)
– the property must be a new or established residence, a home and land package, a parcel of land with a separate contract to build a house, or an off-the-plan apartment or townhouse, and all below specific price thresholds depending on where the home is, for example, $375k in regional Victoria and $600k in Melbourne and Geelong (the property criteria)
– the loan must be through a participating lender such as NAB, the Commonwealth Bank or one of 25 designated small lenders (the loan criteria).
How do you apply
The first step is to ensure that you, your property, your lender and your loan all meet the criteria. These are pretty complex, and while the system is primarily set up for new loans and for new home buyers, it may be possible to access the scheme if you have already signed a contract, wish to switch lenders, or where one borrower in a couple is not a first homeowner.
Once you’re satisfied that you meet all the eligibility criteria, you then apply directly to a participating lender – or better still, get a WhiteStar Broker to do it for you.
When your lender receives your application, and assuming there are places in the scheme still available, the lender then has ten days in which to assess it and offer pre-approved finance. Then, once the lender has provided your income and other details to the scheme, you have 90 days in which to find a home, and an additional 30 days to get the paperwork and contracts in order. If you don’t find a property within 90 days, then your application lapses.
Likewise, if you can’t get pre-approval for a home loan from your lender, your application also lapses, and you are free to apply for a loan elsewhere and begin the process again.
Act quickly – the scheme is NOT open-ended
Each financial year only 10,000 successful applicants across Australia will be able to take advantage of the scheme, and there are no guarantees that the scheme will be continued in the future.
Using a broker to increase your chances
Except for very straightforward cases, the eligibility criteria can be a bit of a minefield, with all sorts of exceptions and special conditions. And that’s before you’ve even approached the lender for a mortgage.
Given that your spot in the scheme is dependent on getting pre-approval for finance from a participating lender, having a broker to help you successfully negotiate the right loan is highly recommended. We can help you, not only get over the hurdles in the scheme but also the many hurdles to secure an affordable loan.
Your WhiteStar broker can also make sure all required information is provided, keep track of the progress of your applications and follow up queries or concerns from your potential lender. As the timeframes and available places are limited, having an expert on your side can go a long way to ensuring you have the best chances of success.
Use this scheme in conjunction with others
You could save even more by combining the guarantee with other programs available to first home buyers such as the First Home Super Saver Scheme and state-based first homeowner grants and concessions.
Naturally, the more opportunities you apply for, the more paperwork you need to provide, and criteria you need to meet. Your WhiteStar broker can assist with all these and take the guesswork and confusion out of the process – which means a smoother, simpler, and hopefully cheaper path towards securing your very first home.
NHFIC has developed a simple fact sheet with key information about the Scheme which can be downloaded from the website www.nhfic.gov.au/media/1235/fhlds-fact-sheet.pdf
Click the below link to check your eligibility
Are you ready to move into your first home sooner, and save money?
Do not delay. As places in the scheme are strictly limited, if you think you may be eligible have a chat to a WhiteStar Mortgage Broker today.