At the start of 2020, the Commonwealth government introduced the First Home Loan Deposit Scheme to assist first home buyers in entering the property market.
This scheme allows eligible purchasers to obtain finance where they have only saved 5% of the purchase price without being required to pay lenders’ mortgage insurance.
The scheme does not involve any grants being provided to the purchaser. Instead the Commonwealth Government guarantees the difference between what the first home buyer has saved and the amount of 20% of the purchase price. Most lenders require at least a 20% deposit or they will charge lenders’ mortgage insurance. The premiums on lenders’ mortgage insurance can cost up to $30,000.00. These premiums are often borrowed by the purchaser and the borrowed amount then accrue interest each year.
The scheme allows first home buyers the opportunity to enter the property market earlier than would otherwise have been possible and save on the costly insurance premiums associate with lenders’ mortgage insurance. However, the scheme is only available to the first 10,000 first home buyers each year.
The eligibility criteria are as follows:
- The purchaser must not have previously owned or held an interest in property
- The purchaser must have income below $125,000 per annum for individuals or below $200,000 per annum for couples
- The property must be purchased for the purposes of residing in as the purchaser’s principal place of residence (i.e. the property cannot be for investment purposes)
- The value of the property must be below the relevant threshold. For NSW the threshold is $700,000 in capital and regional centres (including the Illawarra) and $450,000 for the rest of the state
- The purchaser must have saved a minimum deposit of 5%
- The purchaser must be Australian citizens (permanent residency is not sufficient)
- People purchasing with another person must be either married or defacto. Other persons buying together, such as siblings or parent/child are not eligible.
Applications are lodged through participating lenders. Interested parties should consult with the lender to discuss eligibility.
If you have any questions in relation to the scheme or about purchasing property, please do not hesitate to contact the conveyancing team at Kells on 13 535 57.
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