What Is The Governments First Home Loan Deposit Scheme?
Earlier this year, the government announced that they would be putting together a scheme to aid first home buyers to get their foot on the first rung of the property ladder. What they have come up with is the “First Home Loan Deposit Scheme.”How Does it work? Who is eligible? What are the finer details? In truth, there are a lot of things that still need to be ironed out, I suppose, but I will try my best to shed some light on the topic. So first, a disclaimer here, I am writing this as an opinion piece and a very general guide. So please take the information given here just like that. As said, this has not rolled out, so we are all working with limited information. I am going on what I can glean from my sources at present.
The First Home Loan Deposit Scheme will be available from the 1st of January 2020. It is designed to help first home buyers enter into the property market and buy their first owner-occupied property. There are 10000 of these available Australia wide. To give you a rough idea, every month, that is roughly the number of first homeowners buying properties. Granted, not all of them will be taking advantage of the scheme, but with those numbers, I think the 10000 slots will be quite quickly filled. Hence this blog, if this was something you wanted to take advantage of you might want to be prepared.
How it works is you will need a five percent deposit saved up for the purchase of your new home, the government will then guarantee the further 15% deposit required to keep the loan out of the dreaded Lenders Mortgage Insurance territory. This saves first home buyers a considerable amount of money. To give a rough example if you were to purchase a home through a lender with a 5% deposit. Your Lenders Mortgage Insurance premium would be about $12200.00. At that sort of Loan To Value ratio, you would also have a high-interest rate. We do not have an indication of what the interest rates will be on offer for this scheme for the lenders that qualify, but one would hope that it will be the same as when you do have a 20% deposit and be one of the more competitive rates out there. So effectively, this scheme should save first home buyers on lenders mortgage insurance and on the interest rate they will get. As stated earlier, you will need to have saved up your 5% deposit, and the scheme does nothing for your government fees with regards to stamp duty and transfer fees. You will need to have a further 5% roughly for these. So to make your dream property a reality, you will effectively need 10% of the purchase price.
To qualify for the “First Home Loan Deposit Scheme”, there is a list of criteria that you need to meet. As Castle Mortgages are Mortgage Brokers in Adelaide, I will focus on the requirements for Adelaide and South Australia. The first and most obvious criteria is that this needs to be your first home you have owned and the home needs to be for you to live in. Next, This scheme is only available to Australian Citizens. Permanent residents do not qualify. There is a maximum threshold for income to be eligible too. For singles, you may not earn more than $125000.00 per annum and for couples no more than $200000.00 per annum. The loan has to be repaid on a principle and interest basis, no interest-only loans. There is also a cap on the maximum purchase price of the home that you can buy using this scheme. This cap is different by state and region. For South Australia, in Adelaide, the maximum is $400000.00, and for the rest of the state is $250000.00. I am sure as this is rolled out, more might be added, and it would be wise to remember that the lender or bank that you will be using on this will still have their standard lending criteria that will need to be met. To find out more about the caps on house prices and the eligibility criteria, click here.