Good news may be coming for those that are looking to buy their first home, with the Federal Government announcing the First Home Loan Deposit Scheme (Scheme).
This Scheme takes the form of a Government Guarantee designed to help eligible first home buyers secure a residential mortgage.
The plan at the time of writing is that the Scheme will commence on 1 January 2020.
To be eligible:
- First home buyers must earn less than $125,000 for singles ($200,000 for couples) and have a deposit of at least 5%
- The maximum price of the property being purchased will be capped according to where in each State or Territory the property located, as follows:
- NSW: $700,000 in Sydney and regional centres and $450,000 for the rest of the State.
- ACT: $500,000
- Victoria: $600,000 in Melbourne and regional centres and $375,000 for the rest of the State
- Queensland: $475,000 in Brisbane and regional centres and $400,000 for the rest of the State
- Northern Territory: $375,000
- Western Australia: $400,000 in Perth and regional centres, $300,000 in the rest of the state
- South Australia: $400,000 in Adelaide and regional centres and $250,000 for the rest of the State
- Tasmania: $400,000 in Hobart and regional centres and $300,000 for the rest of the State
How the scheme works
The Government becomes a guarantor to the loan, guaranteeing the remaining deposit amount to secure a financier up to a 20% deposit level. The proposed Scheme means that eligible borrowers would not have to pay additional costs for lenders’ mortgage insurance, which is usually required on loans taken out with a deposit below 20%.
An eligible borrower with a 5% deposit would still be borrowing 95% of the purchase price of the property and be required to pay back that principal, plus interest, to their financier.
Eligible applicants will be required to apply for the Scheme.
Which financiers will have access to the Scheme?
The Government has revealed that the ‘big-four’ banks (including their subsidiaries) will each not be permitted to facilitate more than 5,000 loan guarantees in each financial year, in a bid to enhance market competition.
Further details are expected to be announced in December, once the Government has finalised feedback from submissions. Further information on the scheme can be found here: FHLDS