The New First Home Loan Deposit Scheme, What’s Different This Time?
The Government has announced a second round of the First Home Loan Deposit Scheme that launched on July 1st this year. While the first 10000 places were snapped up pretty quickly last time, there was a lot of room for improvement. This round the application process has changed, so I thought I would write a small article just to keep you abreast.
For those who do not know, the FHLDS is a scheme to help first home buyers in Australia purchase their first home. It is effectively the Government going guarantor on a loan, so that first home buyers do not have to save such a huge deposit and still have access to prime interest rates and avoid the dreaded lender’s Mortgage insurance. In most states it means that new home buyers need only to save a 5% deposit, as they are stamp duty exempt.In South Australia, first home buyers still need to pay stamp duty, meaning that First home buyers will still have to come up with 10 % of the purchase price, all be it the other 5% does not need to be genuine savings. The Government then stands in on the loan for the further 15%, which brings our new clients into the prime lending territory where rates are good, and there is no lenders mortgage insurance. There is quite an extensive qualifying list, and I have written in detail about the First Home Loan Deposit Scheme here, for those who would like to read up on it.
With the last round of the FHLDS that spanned between January 1st of this year and June 30th, 5000 spots allocated to the big banks were quickly snapped up. The smaller banks took about four months to work through their applications. With the last round, you would need to book your spot on the government scheme and then apply for approval with the banks. I think that this lead to many spots being taken up by clients that had no hope of obtaining finance and were effectively shutting eligible people out. The main change this time around is that you need to apply for approval with the eligible lenders and obtain pre-approval before your place on the scheme will be booked. I think this is a great idea and keeps the spaces open for those who have done the hard work to make sure they qualify. Some lenders who are a part of this scheme, though, refuse to assess pre-approvals until clients have a contract of sale. This, I feel, is putting unnecessary pressure on the would-be first home buyer, and hopefully, they will change that policy when they realise they are being avoided.
Another policy change is that a notice of assessment for the current tax year that has just ended needs to be provided with the application. One of the qualifying criteria for the FHLDS is that a single applicant may not earn more than $125000.00 a year and a couple no more than $200000.00. I think many applications in the last round may have failed later in the piece or been incorrectly applied for because the client’s tax was finally done, and they were above the threshold. This means that people who would benefit from the FHLDS the most get a place on it rather than the wealthy benefiting.
It may sound like a lot of effort and work to get a place on the scheme, however, if you have a great mortgage broker in your court to help guide you through the different lender options in this space the benefits you will get as a first home buyer are well worth it. Castle Mortgage are excellent mortgage brokers based in Adelaide. We would love to have a chat with you with regard to you obtaining your first home’s finance. Why don’t you get in touch for a chat with us today?