What is the First Home Loan Deposit Scheme QLD, and are you eligible to save thousands on the purchase of your first home.
The Federal Governments new scheme (known as the First Home Loan Deposit Scheme) helps first home buyers purchase their first home with as little as a 5% deposit.
The benefit to you, is that you are not paying the Lenders Mortgage Insurance, which could mean an estimated saving of up to $16,000 if buying in Brisbane, or on the Gold Coast or Sunshine Coast.
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).
What other Government Rebates, Incentives and Grants can I get if I am buying my first home?
There are currently four different programs you may be eligible for. Take my eligibility quiz to instantly learn which ones you could get.
- 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 – 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 $16,000 – covered in this post.
- HomeBuilder Grant – $25,000 towards the cost of building or buying a brand new home, or renovating an existing home.
How much can you save with the First Home Loan Deposit scheme?
The saving you make is because you don’t need to pay the Lenders Mortgage Insurance (LMI).
In the example shown in the table below, say you purchased a property for $475,000, then you could save $16,179 in Lenders Mortgage Insurance.
This is based on you putting in $29,548 of your savings, where $5,248 goes towards the costs of buying the property (such as solicitors fees and a building and pest inspection) which means $24,300 goes towards your home loan.
If you want to take full advantage of the Scheme in QLD to get the maximum incentive paid, then you would need to pay $475,000 for your property and have $29,548 saved. This gives you the $16,179 saving on Lenders Mortgage Insurance.
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 the insurance.
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).
If you would like to understand if the First Home Loan Deposit Scheme is right for you, please book call instantly, with me here.
What type of property can be bought under the First Home Loan Deposit Scheme?
- An existing house, townhouse or apartment;
- House and land package;
- Land together with a separate contract to build
- Off-the-plan apartment or townhouse.
What is the key criteria to get the First Home Loan Deposit Scheme?
Key Eligibility Checks
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.
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.
3. How much of a deposit do I need saved to be eligible for the First Home Loan Deposit Scheme?
- Applicants must have a deposit of between 5% and 20% of the property’s value;
- 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
4. How much can I spend on a property to be eligible for the First Home Loan Deposit Scheme?
The total value of the property you purchase needs to be under a set threshold, which is different across regions / cities in Australia – see the table below.
For example, if you live in Brisbane, on the Gold Cost or the Sunshine Coast, and want to qualify for the ‘Scheme’, the property you purchase needs to be priced at or below $475,000. See the table below or here to see the thresholds for all of Australia.
Which banks are available on the First Home Loan Deposit Scheme?
- In January, only a few banks are offering this, and as of February 2020, there will be 27 lenders to choose from, which includes both the big name banks you have heard of as well as smaller less well known banks often have good deals.
- The Scheme is available for only 10,000 first home buyers for January to July 2020. Then another 10,000 places will be available from July 2020 to June 2021;
- Proving to be popular – as at the time I am writing this update (13 January), already been 3,000 first home buyers have registered for the Scheme. The Government has decided to put the Scheme ‘on hold’ until February when all lenders are offering it;
Which home loan products are available on the First Home Loan Deposit Scheme?
- 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);
- It is important to note that while you are on one of these loans, you will not be allowed to make any changes, such as borrowing more money / increasing the limit (if you were to renovate for example) – 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;
- Loan term must be 30 years (which is standard);
- 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.
- You can only receive the Government Guarantee once;
Can you get the First Home Loan Deposit Scheme if you are buying vacant land and building a home?
- Yes you can still apply if you are buying vacant land and building a home (you will be taking out a construction loan);
- The total value of the property once complete, still needs to be at or below the thresholds shown in the table above. For example if you are building on the Gold Coast, the total value of your property once complete can not be higher than $475,000;
- 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.
- 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.
Can you get the First Home Loan Deposit Scheme if you are buying and 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)
Can you use the $15,000 First Home Buyers Grant as your deposit for the First Home Loan Deposit Scheme?
If you are fortunate enough to be eligible for both the First Home Buyers Grant and the First Home Loan Deposit Scheme then this is for you.
To be eligible for the First Home Loan Deposit Scheme, 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.
How can I apply for the First Home Loan Deposit Scheme?
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 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.
What to watch?
We will know more about this initiative in the coming months, however from the information available right now, these are our thoughts:
- It will take probably take longer to get your home loan application approved – when you sign a contract of sale on a home there is a ‘finance clause’ that says you need to get your home loan approved usually within 10 to 21 days (or so). I think it will take much longer than this to get the loans approved due to the higher compliance required by the government, which means many people will not get their home loan approved in time for settlement and will potentially miss out on buying their property;
- Not so flexible – You can not increase the loan limit / borrow more money; meaning if in a few years time you want to use some of the equity in your home to renovate – you cant. 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;
- You can’t move out – 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;
- Scarcity – There are 10,000 places available from January 2020 to 30 June 2020, then from 1 July 2020 to 30 June 2021, another 10,000 places are available. As at the latest update on 13 January, already 3,000 places are taken.
It sounds good in theory and the intention behind this is great.
It is really too early to tell how this will work.
I will update page this as I know more.
You can also check your potential eligibility for this scheme on the NHFIC website.
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.