First Home Loan Deposit Scheme

First Home Loan Deposit Scheme

The Federal Government’s First Home Loan Deposit Scheme assists first home buyers entering the housing market by allowing approved applicants to take out a mortgage with just a 5% deposit and avoid paying lenders mortgage insurance (LMI).

What is the First Home Loan Deposit Scheme?

Most banks and lenders require a minimum deposit of 20% of the property’s value for the borrower to be exempt from LMI. The scheme allows first home buyers who can’t reach this threshold to take out a loan if they have saved at least 5% of the value of the property they are buying. The Government will underwrite the loan so that borrowers do not have to pay LMI.

For the Sydney metropolitan area and major regional centres, (Newcastle, Illawarra and Lake Macquarie), the scheme is capped to properties prices at $800,000 until 30/06/2022. From 01/07/2022, this will increase to $900,000 (source TheAdvisor)

First Home Loan Deposit Scheme Price Caps

From 01/07/2022, the following price caps will apply (source TheAdvisor)

  • NSW
    Capital city and regional centre – $900,000 from $800,000 before
    Rest of state – $750,000 from $600,000 before
  • Victoria
    Capital city and regional centre – $800,000 from $700,000 before
    Rest of state – $650,000 from $500,000 before
  • Queensland
    Capital city and regional centre – $700,000 from $600,000 before
    Rest of state – $550,000 from $450,000 before
  • WA
    Capital city and regional centre – $600,000 from $500,000 before
    Rest of state – $450,000 from $400,000 before
  • SA
    Capital city and regional centre – $600,000 from $500,000 before
    Rest of state – $450,000 from $350,000 before
  • ACT
    Capital city and regional centre – $750,000 from $500,000 before
  • NT
    Capital city and regional centre – $600,000 from $500,000 before
  • Jervis Bay Territory and Norfolk Island; and Christmas Island and Cocos (Keeling) Islands have seen no changes, with their respective caps remaining at $550,000 and $400,000

The capital city price thresholds apply to regional centres with a population over 250,000 – including Newcastle and Lake Macquarie, Illawarra (Woollongong); Geelong; Gold Coast and Sunshine Coast.

How does the First Home Loan Deposit Scheme Work?

Talk to us first so that we can help you to determine whether you will be eligible for the scheme. We can then guide you through the process of applying for the scheme and then arrange for the required pre-approval.

What are the benefits of the First Home Loan Deposit Scheme?

The clear benefit of the Government’s scheme is that eligible first home buyers will avoid the additional cost of lenders mortgage insurance (LMI). This could potentially save first home buyers up to $28,609, (based on a purchase price of $800,000 in NSW).

The Government’s deposit scheme can also be used alongside other first home buyer schemes that waive the normal stamp duty cost.

What are the risks of the First Home Loan Deposit Scheme?

Lenders usually charge a slightly higher rate of interest for loans at a loan ratio of 95%.  This variance will depend with each lender so consult us first.