QLD Complete Guide to the First Home Loan Deposit Scheme + New Home Guarantee.
The hardest part of getting into the property market, especially as a first time buyer, is usually getting a deposit saved.
With high property prices, even saving 5% (which is usually the minimum requirement for a home loan), can take years.
To make it that bit harder, because 5% is such a small deposit, the banks charge you an additional fee called lenders mortgage insurance which is a substantial extra cost of buying.
To help, the Federal Government allows eligible first home buyers to buy or build their first home with as little as a 5% deposit.
The Federal Government offer this through two programs:
- First Home Loan Deposit Scheme – for first home buyers buying an established home (already been lived in); or
- New home Guarantee – for first home buyers building or buying a brand a new home.
If you are eligible for either of these Schemes, the benefit to you, is that you are not paying Lenders Mortgage Insurance.
It can mean an estimated saving of up to $27,000 if buying an established (already lived in home) in Brisbane, or on the Gold Coast or Sunshine Coast.
If you are building or buying a brand new home across Brisbane / Gold Coast / Sunshine State, the saving is up to $29,971.
This is, by anyone’s standard, a substantial saving.
There are income caps as well as property price thresholds which will mean you need to check if you are eligible – I have covered this below.
This guide outlines everything you need to know if you are a Queenslander (or buying in QLD) and are interested in finding out if you are eligible for either the First Home Loan Deposit Scheme or New Homes Guarantee.
Let’s get into it!
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Table of contents
1. Latest Government Updates on the First Home Loan Deposit Scheme + New Home Guarantee.
In the Federal Budget announced in May 2021, they said they are continuing with both Schemes.
The way it works is the Government needs to control how many first time buyers take up each scheme (to control the cost), so they release ‘places’ or spots.
It’s a first in first served basis.
As of 1 July 2021, another 10,000 spots become available on the First Home Loan Deposit Scheme (FHLDS) and places are still available for the New Home Guarantee.
I imagine these places will go quickly as the price cap has increased on established homes, meaning you can spend more on a property, as covered in chapter 2 below.
If you are interested, please book a free 15minute call with me and I will look into places and options for you.
2. How much money can you save?
To get straight to the point, the maximum amount you can save is up to $29,971.
But the maximum benefit varies by a few factors depending on:
- Location – across different regions in QLD
- Type of property – buying an established home V building / buying a brand new home.
- Price – of the property.
Generally Greater Brisbane, Gold Coast, Sunshine Coast and other major regional centres are as follows as shown in the table.
These are the maximum amounts you can spend in these areas on your property, and the maximum saving you would get (from not paying Lenders Mortgage Insurance):
First Home Loan Deposit Scheme
Greater Brisbane & Major regional centres.
Or try the government post code search function here to work out what the price cap is for your area.
If you would like to understand if the First Home Loan Deposit Scheme or New Homes Guarantee is right for you, please book call instantly, with me here.
2.1 What are you saving on?
The saving you make is because you don’t need to pay the Lenders Mortgage Insurance (LMI).
The way home loans normally work, is if you have less than a 20% deposit of the purchase price saved, then you need to pay LMI.
For example, normally (before this scheme was around) if you purchased an established home for $600,000 and you saved a deposit saved of $30,000 (5%) then you would need to pay LMI of between $18,000 to $27,000 depending on which lender you got your home loan with.
Under this scheme, the National Housing Finance and Investment Corporation (NHFIC) will cover you by providing a guarantee to make up the 20% deposit required.
This means, the bank effectively sees you as having a ‘20% deposit’ so you no longer have to pay the LMI when you buy the home.
The result is you save between $18,000 to $27,000.
You do not get this saving / money into your account, it is arranged in the ‘background’ for you.
2.2 What you can save when buying an established home (First Home Loan Deposit Scheme)
When buying a home that has already been live in before, the maximum amount you can spend on a property is up to $600,000, to be eligible for this scheme.
That’s assuming you are buying a home around Brisbane, Sunshine Coast or Gold Coast.
Fore more information on the steps to buy a home, see this post here.
In the example shown in the table below, say you purchased an established home for $600,000.
You would need a minimum 5% deposit saved of $30,000, plus you would also need to save $14,798 for your buying costs (a total of $44,798 to be saved).
Normally, you would need to pay $27,200 in Lenders Mortgage Insurance (LMI).
However under this scheme, you would not need to pay the LMI, saving you $27,200.
So if you want to take full advantage of the Scheme in QLD to get the maximum incentive paid, then you would need to pay $600,000 for your property and have $44,798 saved yourself.
First Home Loan Deposit Scheme
This next table shows you some options to give you an idea of the deposit you need to save, and what you could save in Lenders Mortgage Insurance (for established homes priced between $450,000 to $600,000).
This assumes you save a minimum of a 5% deposit + buying costs which include stamp duty, building and pest report, legal fees etc.
For example, if you purchased a home for $550,000, you would need a deposit saved of $43,660. Normally you would pay another $24,933 in Lenders Mortgage Insurance, however under this scheme you do not need to pay this.
First Home Loan Deposit Scheme
Savings at different Purchase Prices
2.3 What you can save when building / buying a brand new home (New Home Guarantee)
When building a home or buying a brand new, never been lived in home, the maximum amount you can spend is up to $650,000, to be eligible for this scheme.
When it comes to what you are spending on a block of land V the cost to build..
Typically, we see our clients spend around $300,000 to $350,000 on the land and normally around $290,000 to $350,000 on the build, keeping the total under the $650,000 cap (see the table below for some options).
And as you are spending under $750,000 in total, this means you qualify for the First Home Owners Grant of $15,000.
I understand this is a lot to get your head around, so please do feel free to book a free 15 minute call and I can talk this through for your personal situation.
For more information on the steps to build a home, check out this post here.
Let’s go through an example of how much you save on Lenders Mortgage Insurance.
In the table below, if you spent $300,000 on a block of land plus another $350,000 on the build of the home (at a total of $650,000), you would:
- Save a minimum deposit of $40,660 – made up of $32,500 of deposit (your 5%) plus the costs of buying of $8,160 (legal fees, stamp duty, transfer fees etc).
- Normally pay $29,971 in Lenders Mortgage Insurance – under the New Home Guarantee you would not need to pay this extra fee (so you save $29,971).
New Home Guarantee
Deposits & LMI saved at different land/build amounts
3. What other Government Rebates, Incentives and Grants can I get if I am buying my first home?
There are currently three main programs you may be eligible for.
The three main programs for first home buyers are:
- First Home Buyers Grant – which is $15,000 towards the cost of building a home;
- Stamp Duty Rebate – which is a rebate or discount on the amount of Stamp Duty you pay when buying a home or vacant land to build on. You can get up to $8,750;
- First Home Loan Deposit Scheme + New Homes Guarantee – where some or all of the Lenders Mortgage Insurance you pay when taking out a home loan is covered for you, up to the value of $30,000 – covered in this post.
There is also the new Family Home Guarantee which is for single parents, where you do not need to be a first home buyer (I am yet to post on this, so you can read it directly on the government site).
4. What type of property can be bought under the First Home Loan Deposit Scheme + New Homes Guarantee?
Most types of properties are covered.
4.1. First Home Loan Deposit Scheme
- An existing house, townhouse or apartment;
4.2 New Homes Guarantee
- Brand new homes – off the plan or newly built
- Building a home – house and and package or land and separate contract to build
5. What is the key criteria for either scheme?
Key Eligibility Checks
QLD First Home Loan Deposit Scheme + New Home Guarantee
5.1. What is the general criteria to be eligible?
- You must be Australian citizens. Permanent residents are not eligible;
- At least 18 years of age;
- Your incomes need to under these thresholds to be eligible:
- Singles can earn a taxable income of up to $125,000 per annum (before tax);
- Couples can earn a combined taxable income of up to $200,000 per annum (before tax);
- Relationship status – Couples are only eligible for the scheme if they are married or in a de-facto relationship. This means you can’t buy with siblings, parent/child or friends.
Note, for all applications made from 1 July 2021 to 30 June 2022, the relevant financial year assessed will be 2020-21.
5.2. What are the property requirements to be eligible?
- No previous property ownership – you must not have previously owned or had an interest in a residential property, either separately or jointly with someone else (this includes residential strata and company title properties, regardless of whether it was an investment or owner-occupied property and whether it was ever lived in).
- Applicants must intend to move into and live in the property as their principal place of residence (i.e.
they must be owner occupiers).
- Must move into the property within 6 months from the date of settlement or, if later, the date an occupancy certificate is issued;
- Continue to live in that property for so long as your home loan has a guarantee under the Scheme.
5.3. How much of a deposit do I need saved to be eligible for the First Home Loan Deposit Scheme + New Homes Guarantee?
- Applicants must have a deposit of between 5% and 20% of the property’s value;
- If you have more than a 20% deposit saved, you will not be eligible for the program (as you don’t pay LMI anyway).
- Your maximum property purchase price is subject to the suburb and postcode of the property you want to purchase. You can check the property price threshold for your property’s suburb and postcode using NHFIC’s property price threshold tool
5.4. How much can I spend on a property to be eligible for the First Home Loan Deposit Scheme + New Homes Guarantee?
The total value of the property you purchase needs to be under a set threshold – these vary by regions / cities as well as if you are buying an established home V building a new home.
See each relevant section below for building V buying an already established home.
Or try the government post code search function here.
6. Which banks are available for both Schemes?
There are now 27 lenders on the panel for residential mortgages.
If we are helping you with your home loan, then we will advise you on which is the best lender for your situation.
- The only major lenders are : NAB, CBA
- Some of the ‘non major’ lenders are: Bank Australia, Bendigo Bank, CUA, MyState Bank and Teachers Mutual Bank (there are many more found here)
7. Which home loans are available?
There are a number of home loan products available on the scheme and I will advise you of which one is right for you.
Some things to keep in mind:
- You can only apply for Owner Occupied home loans, meaning it must be your principle place of living (no investment property loans);
- Repayments must be principal and interest, meaning you need to repay the loan and the interest (no property investment and no Interest Only loans);
- Loan term must be 30 years (which is standard);
- The minimum 5% deposit you have must be what the industry calls ‘genuine savings’; which is money you have saved or held yourself in a bank account for at least a 3 month period – I can advise you on this.
- You must use 100% of the loan for the purchase and improvement of the property (meaning you can’t use any of this loan for a holiday or car etc);
- Have a loan amount commitment not less than 80% and not more than 95% of the relevant Value of the property. For example:
- If the property is valued at $475,000, you need to borrow between $380,000 to $451,250
- If you only need to borrow $320,000 for example (i.e. you have 33% deposit) then this Scheme is not suitable for you anyway as you are not required to pay Lenders Mortgage Insurance anyway (remember the insurance kicks in when you have less than a 20% deposit)
- Or if you only have $8,000 saved as a deposit, which is 1.7% deposit, you are unlikely to be eligible for the scheme – if this is your situation then I recommend you check with me first before you decide the Scheme is not for you.
- Some lenders have restricted the amount you can borrow, for example if you earn $80,000, the maximum you can borrow may be $480,000 under this scheme – I will advise you if this is relevant for you.
- You can only receive the Government Guarantee once;
8. Be aware you can’t make changes to your home loan easily if your equity in the property is less than 20%.
It is important to note that while you are on one of these loans, you will not be allowed to make any changes to your home loan , such as:
- Borrowing more money / increasing the limit (if you were to renovate for example) – To do this you would need to refinance your home loan to another loan that is not a part of the Scheme, then you maybe able to access the equity which is usually fairly easy to do. In this case we would need to refinance your home loan to another lender which means you may need to pay Lenders Mortgage Insurance anyway if you do not have at least 20% equity in your home;
- If you move out of the property – if you decided to move out for some reason, then you are no longer covered by the Scheme, which means you will need to refinance your loan. If you still have less than 20% equity / your own money in the property then you will need to pay the Lenders Mortgage Insurance yourself;
9. Important time frames
The time frames to be aware of depend on the type of property.
9.1 Buying an established home (already built)
If you are purchasing an existing property (one that has already been built and lived in):
- you must move into the property within 6 months of the settlement of your home loan, and
- the property must be purchased under a contract of sale dated on or after 1 January 2020.
9.2. Buying brand new off the plan
Buying off the plan, usually means buying a property before it has been built.
If you are buying ‘off-the-plan’ :
- you must have signed the contract of sale before the settlement date for your home loan, and
- the settlement date for your home loan must occur within 90 days that your home loan becomes guaranteed under the Scheme.
You will also need to move into the property within 6 months of the settlement date for your home loan.
9.3 Buying a house and land packages
A house and land package is when you buy the land and the home to be build, from the same person / company.
You will need to do this before the settlement date for your home loan:
- Purchase and sign the contract of sale for a block of land;
- Sign an eligible building contract to build your home on that land.
These can either be in the same contract or two separate contracts.
In terms of when you need to start building:
- start building your home within 12 months; and
- finish building your home within 24 months of the settlement date for your home loan.
You need to move into the property:
- within 6 months of an occupancy certificate being issued.
9.4 Buying land and the contract to build a home is separate
It common to buy a block of land from one vendor, then find a separate builder to build their home.
The home loan, called a construction loan, is covered by this scheme, and is used to buy both the land and pay for the building of your home.
You will need to enter into an eligible building contract before the settlement of your home loan and:
- start building your home within 12 months; and
- finish building your home within 24 months,
of the settlement date for your home loan.
You may be able to obtain a home loan to buy the land before obtaining a loan to finance the building of your home. If you do so, then your Participating Lender will require you to:
- enter into an eligible building contract within 6 months;
- start building your home within 12 months; and
- finish building your home within 24 months, of the settlement date of your home loan to buy the land.
If you already own the block of land
If you are intending to buy vacant land and construct a dwelling on that land, you will need to enter into a building contract to build a home on the land within six months of the loan settlement date.
If you already own vacant land and intend to take a new home loan to construct a dwelling on that land, your home loan is not eligible for the Scheme.
10. Construction loan information for those building of buying a house and land package.
The home loan you get is called a ‘construction loan’.
- It is designed to fit for the stages and payment schedule of building a house.
- Make sure the total value of the property once built, is still at or below the thresholds / price cap for your region. For example if you are building on the Gold Coast, the total value of your property once complete can not be higher than $650,000;
- You can work this out the total value of your property by adding together:
Total Value = $ Land + $Build + $Extras like a pool, landscaping and fencing.
- The repayments, while you are building your home can be Interest Only.
- Once the build is complete the repayments will switch over to principle and interest repayments.
Eligible building contracts
To be an eligible building contract under the Scheme, your building contract must:
- Be with a licensed or registered builder;
- Specify a contract sum for all costs in respect of the construction of the dwelling; and
- The builder must:
- i) Commence construction within 26 weeks of the settlement date for your home loan; and
- ii) Complete construction and procure the issuance of an occupancy certificate within 24 months of the settlement date for your home loan.
11. Can you get the First Home Loan Deposit Scheme or New Home Guarantee if buying an investment property?
- No, you are not eligible for the Scheme if you are buying an investment property (the property must be your principle place of residence)
12. Can you use the $15,000 First Home Buyers Grant as your deposit for the First Home Loan Deposit Scheme or New Homes Guarantee?
If you are fortunate enough to be eligible for both the First Home Buyers Grant and either the the First Home Loan Deposit Scheme or New Homes Guarantee then this is for you.
To be eligible for these Schemes, you need a 5% deposit saved.
Unfortunately, the $15,000 First Home Owners Grant can’t be included as part of the 5% deposit. You still need to save 5% yourself.
The $15,000 Grant can still be used to boost your deposit on top of the money you save yourself.
13. How can I apply for the First Home Loan Deposit Scheme or New Home Guarantee?
If we help you with your home loan, we will assess a range of options for you which best fit your personal circumstances.
This includes determining if the First Home Deposit Scheme or New Home Guarantee is right for you and you are eligible. We will complete the application process on your behalf.
If you would like to speak to me about this, please book a call with me, instantly, here.
The information contained within this page is general in nature. It serves as a guide only and does not take into account your personal financial needs. Before you act on this information you should seek independent legal and financial advice. Copyright Blackk Finance 2021.