First Home Loan Deposit Scheme: How To Secure Your Spot?

It came as no surprise that first home buyers quickly snapped up all 10,000 places of the First Home Loan Deposit Scheme during the last financial year. Under the scheme, first home buyers with a 5% deposit saved anywhere between $10,000 and $30,000 in LMI fees based on the maximum regional price cap. This year, the places are limited to 10,000, and we don’t know if there will be any further releases in the future. What’s more, this is a “first-in-first-serve” deal. The new scheme places are available from 1 July 2020. To ensure you get a spot under the new scheme, you can follow our guide below:

1. Check the eligibility criteria

The first thing you need to do is to check your eligibility under the scheme. The eligibility criteria for the FHLDS scheme can be best summarised with the following five key tests.

• Deposit requirement test: At a minimum, you should have at least 5% of the property value as a deposit. E.g. you’ll require a $25,000 deposit for a $500,000 property.
• Income test: For single applicants, your taxable income should be less than $125,000; for couples, the combined income should be less than $200,000.
• Prior property ownership test: You must have never owned a property or held an interest in a property before in Australia.
• Citizenship and minimum age test: You should be an Australian citizen and over the age of 18 to qualify. If you’re applying as part of a couple, both of you should be citizens. Permanent residents are not accepted.
• Owner-occupier test: The scheme is provided to enable first home buyers to purchase a property to live in, as such investment properties are not accepted.

Alternatively, you can use our eligibility calculator to do the same. Equally important to note here is that there are regional price caps on property prices that you can purchase under the scheme.

2. Get your documents in order

When applying for a scheme place reservation, you’re required to provide your:

• Full name and D.O.B;
• Notice of Assessment for the financial year 2019-2020 (tax returns);
• Identification documents such as Medicare card, and either a valid Australian passport or proof of Australian citizenship;
• Along with other standard home loan documents such as your bank account statements showing your deposit, your two most recent payslips etc.

You’ll also be required to sign the First Home Buyer Declaration Form. Your broker or your bank will let you know of any additional forms you may need to sign.

3. Submit your tax returns

The National Housing Finance and Investment Corporation (NHFIC) recently announced that for all new applications, first home buyers “will need to provide their 2019-2020 Notice of Assessment as part of their application to ensure their taxable incomes is no more than $125,000 for single applications and $200,000 for couple applications.” Basically, the FHLDS has been amended so that borrowers need to provide their Notice Of Assessment from 1 July 2020. The problem with this is that most people don’t lodge their tax return right away. For most people, the deadline is 31 October 2020, and for those using an accountant or tax agent, the deadline varies but can be as late as 15 May 2021. In other words, if you are quick to lodge your tax return, then you can get in before everyone else and secure one of the limited spots in the scheme.

4. Apply through a mortgage broker

To reserve a scheme place, you can either apply directly through one of the 27 participating lenders under the Scheme or mortgage brokers accredited with these lenders. Each lender on the panel has its own lending policies which differ greatly between them. Some of the areas where lender policies differ are:

• Genuine savings;
• Employment requirements;
• Acceptable income types;
• Borrowing power including living expenses and income assessment;
• Credit score;
• Security location etc.

This is crucial as any one of these policies can get your application knocked back! Applying with the right participating lender becomes key in getting approved, and this is where a mortgage broker can help! Another advantage of applying through a broker is that, once we’ve made a scheme place reservation through a particular lender. We can help you shop around with multiple lenders to get a more competitive rate. More importantly, we know which lenders are accepting applications to be put on the waitlist so that your application gets a headstart when the scheme places become available. To reserve a scheme place and find a home loan with a competitive interest rate, speak with one of our award-winning specialist mortgage brokers by giving us a call on 1300 889 743 or by filling in our online assessment form.

Can I use this scheme with the Home Builder Grant?

Yes, you can use the First Home Loan Deposit Scheme along with the new Home Builder Grant, provided you’re either buying a house and land package or making an off-the-plan purchase or a land purchase with a separate contract to build. The building grant also has its own eligibility criteria which you must fulfil. E.g. the new build needs to commence within 3 months of signing the building contract and the contract needs to be dated between 4 June 2020 to 31 December 2020, among other criteria. You may also be able to use the First Home Owners Grant. However, getting these three grants schemes to align properly becomes challenging, so, please speak with one of our specialist mortgage brokers to determine how best to proceed with this. It is worth noting here that, currently, some lenders are only accepting applications for established properties initially; construction loans are not being accepted by some.

Buying your first home under the scheme doesn’t have to be hard!

Did you know the First Home Loan Deposit Scheme reservation process requires that you get pre-approved for a home loan within 14 days or you risk losing your place? Similarly, you’re also required to find a property within 90 days (an extension can be granted) of the pre-approval date. As mortgage brokers, we can:

• Make the entire end-to-end process simpler for you.
• Make finding a property easier with suburb reports, and property reports of your choosing;
• Order a free upfront valuation; and
• Help you through settlement and beyond.

Please speak with one of our specialist mortgage brokers by giving us a call on 1300 889 743 or by filling in our short assessment form to buy your first home.