What the Federal Government's First Home Loan Deposit Scheme means for you

By Zac Herps, Managing Director at Hillhouse Legal Partners
| 2 min. read

Key takeaways

  • The introduction of the First Home Loan Deposit Scheme allows some first home buyers to obtain the benefit of the Government effectively guaranteeing up to 15% of the 20% deposit required, which means buyers will avoid paying Lenders Mortgage Insurance.
  • The buyer must earn either less than $125,000 pa as a single or less than $200,000 pa as a couple to access the scheme.
  • A cap of 10,000 buyers has been placed on the amount of people who can benefit under this scheme and a cap on the price of the home will also apply.

The Federal Government recently introduced the First Home Loan Deposit Scheme, which will come into effect on 1 January 2020. This scheme will allow some first home buyers who earn either less than $125,000 pa as a single or less than $200,000 pa as a couple to obtain the benefit of the Government effectively guaranteeing up to 15% of the 20% deposit required. This means buyers will avoid paying Lenders Mortgage Insurance insisted upon by most financial institutions. 

If the first home buyer:

  1. is single and earns less than $125,000 per annum, or is a couple and earns less than $200,000 per annum; and
  2. has saved 5% of the purchase price of the property,

 the government will guarantee up to 15% of the 20% deposit ordinarily needed to purchase the first home. 

This means up to 95% of the purchase price will still need to be borrowed by the first home owner, but the mortgage insurance requirement will be avoided because the government is effectively guaranteeing up to 15% of the purchase price instead. 

The scheme will be administered through the National Housing Financial and Investment Corporation in partnership with lenders.

A cap of 10,000 buyers has been placed on the amount of people who can benefit under this scheme and a cap on the price of the home will also apply. The cap is yet to be determined and may vary from location to location, but in Queensland is anticipated to be:

  1. $475,000 for houses in Brisbane and certain regional centres;
  2. $400,000 for houses in the rest of Queensland.

The benefits of the scheme are that, if eligible and chosen, first home buyers could be saving around $5,000 to $10,000 on Lenders Mortgage Insurance premiums. It also allows first home buyers to break into the market with only a 5% deposit rather than a 10% or 20% deposit which is usually required.   

Critics of the scheme say that it will be limited to approximately only 10% of first home buyers (about 100,000 first home owners purchase each year in Australia) and as the majority of people earn less than the required threshold income caps it is not limited to assisting those that need it most.

In addition to this scheme, state and territory governments also offer:

  1. First Home Owner grants (reserved for first home owners purchasing newly built properties)
  2. Transfer/Stamp Duty concessions (most state and territory governments waive or discount stamp duty for first home buyers)

The Federal Government also offers the First Home Super Saver Scheme which allows people to make extra contributions to their super and withdraw those contributions for a home loan deposit. See our previous article here for further information on this scheme.

If you would like to discuss or need assistance with purchasing or selling a property please contact us.

The information in this blog is intended only to provide a general overview and has not been prepared with a view to any particular situation or set of circumstances. It is not intended to be comprehensive nor does it constitute legal advice. While we attempt to ensure the information is current and accurate we do not guarantee its currency and accuracy. You should seek legal or other professional advice before acting or relying on any of the information in this blog as it may not be appropriate for your individual circumstances.