First Home Loan Deposit Scheme Announced

The federal government’s First Home Loan Deposit Scheme will guarantee mortgages for first home buyers who have only saved a 5% deposit, effectively helping them buy sooner without paying lenders mortgage insurance premiums. Great news if you are first home buyers saving for a home.The First Home Loan Deposit Scheme is scheduled to commence from 1 January 2020 and addresses one of the greatest hurdles facing those enthusiastically saving to purchase their first home.

First Home Loan Deposit Scheme, so just how does it work?

If you’ve saved 5% of the purchase price of your property the government will guarantee the remaining 15% of the deposit.
You will still need to borrow 95%, but you can avoid Lenders Mortgage Insurance (LMI). Eligible first home buyers can’t be earning more than $125,000 a year ($200,000 for couples).
Access to the scheme is limited to 10,000 borrowers.The value of eligible homes under the scheme will vary by region.

The scheme starts on 1 January 2020. This scheme will make low deposit home loans cheaper. The scheme will be administered through the National Housing Finance and Investment Corporation (NHFIC) in partnership with lenders. In an announcement, the government said it would prioritise “smaller lenders to boost competition”.

First Home Loan Deposit Scheme, so what are the benefits of the scheme and who is eligible?

Presently 5% deposit home loans already exist, but you generally need to pay Lenders Mortgage Insurance (LMI) when borrowing more than 80% of a property’s value. LMI can be expensive. If you bought a $400,000 property with a 5% deposit ($20,000) you’d be looking at a $12,768 LMI premium. That’s an estimate taken from Genworth’s LMI premium estimator. The First Home Loan Deposit Scheme removes this cost, so you’re saving money and also time. You can save a 5% deposit in a quarter of the time it would take to save 20%, after all.

Who is Eligible?
You will need to be a first home buyer (and if you own an investment property you won’t be eligible) earning $125,000 ($200,000 for a couple) a year or less.

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