19 Sep 2007

The First Home Loan Deposit Scheme

There was good news for potential first home buyers when Prime Minister Scott Morrison announced the First Home Loan Deposit Scheme in the leadup to the federal election. Saving for a deposit is a time-consuming challenge for most first home buyers. The government’s First Home Loan Deposit Scheme will commence on 1 January 2020 and will allow 10,000 eligible first home buyers each year to secure a home loan with a deposit as low as 5%, rather than the standard 20%. The Scheme will be administered by the National Housing Finance and Investment Corporation (NHFIC). Loan applicants intending to use the First Home Loan Deposit Scheme will still need to demonstrate to their lender that they can meet their repayments to be approved. 110,000 Australians bought their first home in 2018, the highest number since 2009. The First Home Loan Deposit Scheme is likely to see that number increase.  

Who will be eligible for the First Home Loan Deposit Scheme?

The Scheme will be open to single first home buyers earning a taxable income of less than $125,000 per year, and couples who earn less than $200,000 per year combined.  

How will the First Home Loan Deposit Scheme work?

The federal government will provide a guaranteed loan to approved first home buyers to cover the difference between the deposit that they’re able to provide (of 5% or more) and the 20% deposit required by most lenders. This will also help borrowers to avoid the cost of lenders’ mortgage insurance (LMI). LMI protects the lender if a borrower defaults on their repayments. Borrowers are typically required to pay for LMI if they have a deposit of less than 20%.  

What about First Home Owner Grants and the First Home Super Saver Scheme?

The First Home Loan Deposit Scheme can be used in conjunction with the First Home Buyer Grants offered by State and Territory governments across Australia, as well as with the First Home Super Saver Scheme (FHSSS). The FHSSS allows first home buyers to save for a deposit within the tax-effective superannuation environment. Superannuation contributions in Australia are taxed at the concessional rate of 15%, which is lower than even the lowest marginal tax rate. You can, therefore, save money for your home deposit faster within your superannuation account by paying less tax. Eligible participants in the FHSSS can voluntarily contribute up to $15,000 per year (up to a maximum of $30,000) and then withdraw those funds for a home deposit. Normally you can’t withdraw your super funds until you retire.  

How we can help

At Fast Repay Home Loan, we can help you with sourcing your first home loan. We’ll take the time to understand your needs and goals so we can provide you with the best possible advice. We can also help you to implement strategies so you can become debt-free and own you your home as soon as possible. Call 1300 707 955 or email info@fastrepayhomeloan.com.au/backup to find out how we can help you, and to secure your free consultation with a finance expert.    

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