Is The First Home Loan Deposit Scheme Right For Me?

Buying the first home for yourself or your family is obviously very exciting, but it can be quite a challenging process as you have never seen the proceedings before. You may have read the news that the Australian government has come up with a new scheme called first home loan deposit scheme where you are allowed a big concession when you are about to buy your first home. However, a lot of questions must have riddled your mind. Will you be eligible for it? How will you apply for it? Most importantly, is this good for you? Not to worry, we are here to answer all your questions. Read on to learn about the scheme.

What is the first home loan deposit scheme?

The First Home Loan Deposit Scheme (FHLDS) is an initiative of the Australian Government to help qualified first home buyers construct or buy a new home. The Scheme is coordinated by the National Corporation of Housing Finance and Investment (NHFIC).

Generally, first home buyers with less than a 20% downpayment have to pay insurance coverage to creditors. Under this new program, eligible first-home buyers can purchase or build a new home with a deposit of as little as 5% (lenders criteria apply). This is because NHFIC promises to a participating lender up to 15% of the value of the purchased property that is funded by the home loan of an approved first home buyer. For example, if you have $45,000 to put into a home of $500,000, the government will step in and guarantee the first $55,000 of your loan so that it brings up to $100,000 or 20% of the overall value of the property to your protection, except government fees such as stamp duty.

What does this scheme do for you — is it right for you?

This question has subparts that need to be answered first. Read on to find out all about it.

Which properties come under this home loan in Melbourne?

The following categories of properties are covered by the first home loan deposit scheme:

• A newly built or already existing home
• A Package of House and Land
• A barren land along with a separate contract for the construction of a home
• An apartment or townhouse that is off-the-plan

There are, however, thresholds on the valuation of the property. These vary depending on the state or territory in which you are situated and whether you are in a provincial or a metropolitan area.

Who are eligible for the first home loan deposit scheme?

The first home loan deposit scheme is open to first-time homebuyers in Australia, however, there are certain eligibility criteria that you will have to pass to receive the benefits of the program. It is smart to consult a home loan broker in Melbourne itself who will be able to explain every criterion in details and guide you through the whole process.

• You, the home-owner, need to be at least 18 years old.
• You need to be an Australian citizen.
• You need to hold a medicare card.
• Only owners and occupiers are eligible for this program, i.e., you will need to purchase the house to use it for residential purposes only. You also need to ensure that the property you are purchasing comes under the Australian definition of “residential property”.
• You are required to move into your new residence within six months of settlement, and for as long as your loan “has a guarantee under the Scheme,” you must also continue living in the house.
• You need to deposit at least 5% of the value of the property, but the deposit cannot exceed 20% of the property’s value. However, most lenders, especially banks, require this to be genuine savings, meaning they might ask to see the savings plan that you created in order to save the amount as it puts their faith on you as a borrower who will pay their mortgages on time. Having said that, every lender has its own policies regarding genuine savings, so one-size does not fit all in this scenario.
• To be qualified for this program, you must be a first-time homeowner only. You cannot have purchased or be paying the interests of a previous home owned by you individually, or jointly with someone else. This involves residential strata as well as land with company title — irrespective of whether it was an investment or residential property, or whether you ever lived in it.
• There is also a minimum salary requirement for being eligible for this scheme, which is determined by your income of the year prior to the one you will be applying for the loan. If you are a single owner, your salary must be up to $125,000 p.a., and if you’re applying as a couple, the requirement is $200,000 p.a. Even so, there is a catch while applying as a couple. You are only eligible if you are married or in a live-in relationship. In case you wish to apply with your parents, siblings, children, or friends, you won’t be eligible.
• Loans under the Scheme usually mandate that the principal (as well as the interest) of the loan be repaid on a scheduled basis for the full duration of the home loan contract. However, if the loan relates to the purchase of vacant land for the purpose of building a house, you will be allowed to apply for an interest-only loan for the period when your house is being constructed.

Documents required for applying for this home loan in Melbourne

You will initially need to send the following details to your home loan broker in Melbourne or to a participating bank for the Scheme Place Reservation process under the First Home Buyers Scheme. So it is critical that you are ready with all the documentation -

• Your full name and birth date;
• Your number for Medicare (including your card position);
• For the 2019–2020 financial year, the Notice of Assessment for your taxable income; and
• Other standard papers on home loans.

Is this first home loan deposit scheme for you?

We have mentioned the eligibility criteria and the documents required for you to be qualified to apply for this particular home loan in Melbourne. If you follow through, it can be great news for you, especially if you are a low and middle-income employee. Not only can you buy your first home much sooner than before as you only have to save up 5% of the home value, but you also save thousands of dollars as the LMI fees get eliminated in this situation, even with this low amount of a down payment. What is more, even after you buy your first home using this deposit scheme, you remain eligible for the other government schemes as well, such as the First Home Super Saver Scheme, state and territory First Home Owners Grant along with stamp duty discounts.

While this particular home loan in Melbourne brings a lot of advantages to the aspiring first-time home buyers, you need to keep one very important thing in mind — the scheme is limited to only 10,000 borrowers each year. This means you will have to plan and prepare for applying for this plan at least one year prior (especially with the income of one-year demonstration criterion) in order to compete and win a spot.

Conclusion

Before you get into a long-term EMI plan like this first home loan deposit scheme, it is crucial that you calculate your income well and know your own lifestyle very strictly, together with know-how secure your current employment is. It should not so happen that you fulfil your dream of buying your home, but all the money you earn goes into paying the mortgage, or you lose your employment suddenly. It is best if you hire a professional home loan broker in Melbourne who will sit and go over every pros and cons with you and also guide you about all the schemes that you can apply for. They will keep you updated with everything that is required of you, so you never miss out on an opportunity just for being late.