First home loan deposit scheme – in simple terms

first home buyers accepting keys to property

So we heard on the radio today that over 70% of Aussies see homeownership for first home buyers as almost impossible nowadays.

And it makes sense. Now to be fair, we’re not sure if it’s actually home prices that are the issue or stagnant wages. Perhaps a bit of both?

You could also point at an influx of outside money into a region can make matters worse. A case in point is Southeast Queensland. In recent years, many people from NSW and Victoria have migrated to this part of the country, bringing with them larger deposits from their home state and often higher incomes. This can create an inflated property market. Or perhaps it just pushed the prices to where they should be? It’s all quite subjective.

No matter the reason, it’s getting tougher and tougher for first home buyers to enter the property market.

Enter the Federal Government’s “First Home Loan Deposit Scheme” or FHLDS.

Ok, so how does this work?

In simple terms, you need 5% of the home purchase price as your deposit. So you still need something. Given the average price of a first home is around $600,000 this equates to $30,000. That’s not a small amount of money and does take some time to save, but it’s a far cry from the usual 20% the banks require without Lenders Mortgage Insurance – LMI. Watch this short video where Nathan Coad, Director at NMC Finance explains LMI.

Once you have this saved, the Federal Government via the FHLDS will front the remaining 15% of the deposit and the bank will lend the remaining 80%. So no nasty “LMI” to be paid.

The devil is always in the details. So here we go:

The good:

  • You save potentially thousands on LMI
  • You only need to save a 5% deposit

The bad:

  • There are limited places available, so you’ll need to check with lenders about their availability
  • Strict criteria exist on purchase prices per state – given the nature of the real estate market lately, this has a greater impact
  • Reasonably low maximum income levels for singles and couples means a lot of people may not qualify as your income can be too high

However, all in all, it’s a very good scheme to help first home buyers into the market. There are more criteria to be met so please reach out and we can check your eligibility and run through the best option for your individual circumstances.

NMC Finance is an experienced mortgage loan broker and can help you explore all your options. Contact Nathan Coad on 0498 766 639 or nathan.coad@nmcfinance.com.au to find out more.

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