First Home Loan Deposit Scheme
What is the First Home Loan Deposit Scheme?
As part of a $500 million scheme, the government will be giving a “leg up” to first home buyers to assist them to get into the property market, commencing 1 January 2020.
Generally, a lender will require you to have saved a 20% deposit OR they charge what is called ‘lender’s mortgage insurance’ to cover the risk of buyers who have smaller deposits. Lenders mortgage insurance (LMI) varies depending on the amount your borrowing but can sometimes be up to $10,000.With the introduction of this scheme, you could take years off the time required to save for your first home.
But before you start scrolling our website for a property to buy on January 1, make sure you do your research as there’s a few catches with this scheme:
- The government is only giving out 10,000 guarantees and will begin 1 January 2020 on a “first come, first served” basis, preferencing those who have a deal ready to go and are skilled in form-filling.
- You must earn less than $125,000 a year for singles, or $200,000 a year for couples.
- You still have to pay back the loan as normal, the government only guarantees your LMI insurance. For example, you want to purchase a home for $320,000. You can apply for a loan with only $16,000 (5%) in your bank account. Instead of having to pay almost $10K in LMI on top of your $304K loan, you only need to pay back the $304K (obviously plus your lenders interest).
- There are price ‘caps’ for properties you can buy under the scheme, which are set according to where you are purchasing. In Dubbo the loan guarantee will cap at $450,000.
The First Home Loan Deposit Scheme has the potential to help you get a foot in the door of real estate. If you want more information on buying your first home, chat to one of our agents by calling (02) 6882 3544. Also check out our other blog posts about buying a home on one income and things to be mindful of before buying a house.