If you’re a first home buyer, consider yourself lucky. There are several government incentives currently available that make home buying, much more affordable and more accessible than we’ve seen in many years.
One of the most effective programs is the First Home Loan Deposit Scheme, which can help alleviate one of the big hurdles of getting into a home – coming up with a deposit.
What is the First Home Loan Deposit Scheme?
The First Home Loan Deposit Scheme is a Federal Government-supported program with a goal of allowing first home buyers to access a home loan with a smaller deposit than is usually required.
Typically, lenders look for a deposit of around 20% of the property value. It’s a safety net that protects them if the home buyer gets into financial trouble and is unable to repay the loan or if property prices fall.
Generally speaking, borrowers are able to access loans with a higher loan to value ratios (LVR) such as 90% or even 95%. However, in these situations, borrowers are normally required to pay Lenders Mortgage Insurance (LMI), which is often more than $10,000. The added burden of LMI often makes the loan unaffordable for many borrowers, especially first home buyers.
As a result, the Federal Government introduced the First Home Loan Deposit Scheme. The program allows first home buyers to access a loan with a deposit as low as 5%. The Government will act as a guarantor for the remaining amount up to the 20% threshold. This is a similar situation to when a borrower uses a guarantor, which is often people’s parents in the case of first home buyers.
One of the major advantages that makes the First Home Loan Deposit Scheme so powerful is that it can be used in combination with other Government incentives, allowing first home buyers to purchase a property a lot quicker, by accessing things like stamp duty exceptions, or even the HomeBuilder Grant.
How to qualify for the First Home Loan Deposit Scheme
You and the property need to meet several conditions and requirements to be eligible for the First Home Loan Deposit Scheme:
- Properties must be valued under certain price levels in the city and other regional centres.
- Your salary must not exceed $125,000 as a single or $200,000 as a couple.
- The loan is meant for owner-occupiers, not investors.
- You require the 5% deposit from genuine savings – not something like the First Home Owners Grant.
- Must still be able to meet the lender’s requirements for getting a loan – such as suitable income to service any debt.
| State or Territory | Capital city and regional centres | Rest of state |
| NSW | $700,000 | $450,000 |
| Victoria | $600,000 | $375,000 |
| Queensland | $475,000 | $400,000 |
| Western Australia | $400,000 | $300,000 |
| South Australia | $400,000 | $250,000 |
| Tasmania | $400,000 | $300,000 |
| Australian Capital Territory | $500,000 | – |
| Northern Territory | $375,000 | – |
The Commonwealth Government awards 10,000 grants each year: 5,000 of the grants are allocated by the National Australia Bank (NAB) and the Commonwealth Bank of Australia (CBA), while the remaining 5,000 are split between smaller lenders.
It is important to understand that as a borrower, you will still need to meet the lender’s criteria to access a loan. That means having enough income to service any debts and being in a healthy financial position with a good credit rating.
Unfortunately, the first home owners grant is not able to be used as a part of your minimum deposit under the First Home Loan Deposit Scheme and you will still need to be able to contribute 5% in genuine savings.