First Home Loan Deposit Scheme
What is the First Home Loan Deposit Scheme?
The Australian Government has introduced the Scheme to assist eligible first home buyers to purchase a home sooner.
It does this by providing a guarantee to participating lenders that will allow eligible first home buyers to purchase a home with a deposit of as little as 5 per cent without needing to pay for lenders mortgage insurance.
The Australian Government operates the Scheme through NHFIC (National Housing Finance Investment Corporation).
What is the “guarantee”?
The Australian Government provides a guarantee on an eligible loan provided by a participating lender to an eligible first home buyer.
The guaranteed amount is the difference between the first home buyer’s deposit (of at least 5 per cent) and 20 per cent of the value of the eligible property. It is similar to parental or family guarantees which already exist, but in this case NHFIC acts as the guarantor.
Do buyers get a cash payment?
No, the guarantee is not a cash payment or a deposit on a home loan.
What will the First Home Loan Deposit Scheme cost a buyer?
There are no costs or repayments associated with the Scheme guarantee. However, the buyer is responsible for meeting all costs and repayments for the home loan associated with the guarantee.
How many places are available?
The Australian Government is making up to 10,000 guarantees available per financial year from 1 January 2020. Another 10,000 Scheme places will be available from July 2020.
5,000 Scheme places were made available to the major banks – CBA and NAB – on 1 January 2020, all of which are now currently reserved.
The remaining 5,000 Scheme places for the current financial year are being offered through 25 non-major lenders. As of 2 March 2020, most of these Scheme places are still available to be reserved by potential first home buyers.
Even though all the Scheme places with the major banks are currently reserved, first home buyers can continue to engage with the major banks as the reserved Scheme places may become available if applicants do not proceed to purchasing a property.
If you have secured a Scheme place with one participating lender, you can still apply with any of the other participating lenders to ensure you can access a competitive loan rate. You will only receive one Scheme place.
A buyer must be eligible to apply
Your eligibility for the Scheme depends on your personal financial circumstances, property eligibility and the availability of guarantees.
Provided you satisfy the Scheme eligibility criteria and lending requirements of a participating lender, you are not prevented from applying for the Scheme.
How long does the First Home Loan Deposit Scheme guarantee remain in place?
The guarantee stays in place until the loan is refinanced, you sell your home, move out or until your loan principal balance reduces to below 80 per cent of the value of your property at purchase.
What are the eligibility criteria for the First Home Loan Deposit Scheme?
There are a range of eligibility criteria for the Scheme that cover:
Borrower eligibility | Loan eligibility | Property eligibility
BORROWER ELIGIBILITY
The Scheme is open to singles or couples.
Singles
If you are looking to purchase your first home as the only person named as a borrower in your home loan, then you would apply under the Scheme as a single.
Couples
If you are looking to purchase your first home with your spouse or de facto partner, where you are both named as borrowers in your home loan, then you would both apply under the Scheme as a couple.
Arrangements with other people that do not qualify
If you are intending to be named as a borrower in your home loan with someone else who is not also your spouse or de facto partner, and whether that is under a home loan that:
Only has 2 borrowers, or
Has 3 or more borrowers, even if one of the other borrowers is also your
spouse or de facto partner,
then that home loan will not be eligible for the Scheme.
For example, a loan arrangement with a relative – such as with a sibling – will not be eligible for the Scheme.
Eligibility Checks
There are several criteria used to determine eligibility under the scheme. They relate to your eligibility as a first home buyer who is able to have the benefit of the Scheme and all criteria must be satisfied before applying.
The key checks for your personal circumstances are:
An income test
Singles – taxable income not more than $125,000 for the previous financial year.
Couples – combined taxable income not more than $200,000 for the previous financial year. Income is assessed by the Lender.
A prior property ownership test
The property ownership test requires you to not have ever owned:
A freehold interest in real property in Australia
An interest in a lease of land in Australia with a term of 50 years (or more), or
A company title interest in land in Australia.
A minimum age test
The Scheme is only open to persons that are 18 years of age or over.
Citizenship test
The Scheme is only open to current Australian citizens.
If you are applying under the Scheme as part of a couple then you will both need to be Australian citizens.
The Scheme is not open for permanent residents who are not Australian citizens.
A deposit requirement
There is a minimum deposit requirement for the Scheme.
The Scheme is to assist singles and couples (together) who have at least 5% of the value of an eligible property saved as a deposit. If you have 20% or more saved, then your home loan will not be covered by the Scheme.
An owner-occupier requirement
To meet this requirement, you will need to move into the property within 6 months from the date of settlement or, if later, the date an occupancy certificate is issued, and continue to live in that property for so long as your home loan has a guarantee under the Scheme.
If you don’t live in your property – including where you move out of the property at a later time – your home loan will cease to be guaranteed by the Scheme. In these circumstances there may be terms and conditions of your home loan that require you to take certain actions – including that you may be need to pay fees and charges and/or take out insurance that would not have otherwise applied if your home loan were participating under the Scheme.
PROPERTY ELIGIBILITY
Which properties are eligible for the Scheme?
For a property to be eligible for the scheme it must:
Be a ‘residential property’ – this term has a particular meaning under the Scheme, and you should ask your lender if there is any doubt.
Have a purchase price under the price cap for its location (amount of price cap varies between regions and states)
Be purchased by an eligible first home buyer under the scheme.
At the settlement date for your home loan, you will be the sole registered owner/s of the property.
Be a property which is (1) an established dwelling, or (2) a new-build dwelling that is purchased under a house and land package, a land and separate contract to build a home or an ‘off-the-plan’ arrangement that is financed under an Eligible Loan from a participating lender.
LOAN ELIGIBILITY
How do you apply for a place under the Scheme?
You must apply for the Scheme through a participating lender. A participating lender is a bank or other residential mortgage lending institution that has been appointed by NHFIC to offer guaranteed loans under the Scheme.
When can I apply?
The Scheme commenced on 1 January 2020 for the participating major bank lenders and on 1 February for the non-major lenders.
Can I apply with more than one lender?
Yes, you can make applications with more than one participating lender. Although you may have multiple applications, you will only be given one place under the Scheme.
Can I transfer my reserved Scheme place between participating lenders?
If you have secured a Scheme Place with a participating lender, you can still apply for a Scheme-Backed Loan from any of our other participating lenders. This is because when the new participating lender makes a reservation on your behalf, NHFIC will be able to see that you have an existing Scheme Place and will link that reservation to your existing Scheme Place. You do not need to specifically request a participating lender or NHFIC to transfer your Scheme Place. This will be managed by the participating lender you ultimately decided to obtain your Scheme-Backed Loan from.
If you decide to apply to more than one participating lender it is important that you:
Understand the time periods within which you must meet certain requirements will commence from the date of your first Scheme Place reservation; and
That you use the same reservation details when speaking with each participating lender. If you do not use the same details, a participating lender may not be able to (or, there could be delays to,) make a linked reservation on your behalf and this may impact on your ability to obtain a Scheme-Backed Loan from that participating lender.
Can I use a broker?
Yes. Eligible borrowers may apply for a guaranteed loan through a registered mortgage broker, provided that the broker has a relationship with a participating lender.
The Scheme requires me to have a minimum deposit of 5 per cent made up of genuine savings. What is considered genuine savings?
Broadly, genuine savings refers to amounts either saved or held over a period of time which your lender considers to be genuine savings. Your lender will be able to provide you with further details on whether the deposit you have is made up of genuine savings for the purposes of their lending criteria and the Scheme.
What do I need to provide my lender to apply?
To reserve a place for you under the Scheme, your lender will need your full name (legal name as it will appear on the title of any property you purchase), date of birth and your Notice of Assessment from the Australian Taxation Office for the 2018-19 income year.
Your lender may also request other documents or information from you depending on your circumstances and their processes.
What happens if my Scheme place reservation expires?
If your Scheme place reservation expires you will be required to reapply for another Scheme place with a participating lender. You will only be able to reapply if there is a Scheme place available at the time your lender submits an application on your behalf.
When do I find out if I have a guarantee?
You need to apply for the Scheme with a participating lender or their authorised representative, such as a mortgage broker. Your participating lender will tell you whether or not you have been successful in reserving a place under the Scheme for a guaranteed loan. Processing times may vary between different participating lenders so you will need to check with your lender. Generally, however, the time it takes to assess your eligibility for a guarantee aligns with the participating lender’s timeframe for assessing your loan application.
Your home loan cannot be guaranteed under the Scheme unless you are also approved by your lender for an eligible loan on an eligible property.
How long do I have to find a property?
You have 90 days from the date you have been first pre-approved under the Scheme to find a property and enter a contract of sale.
Your lender will be able to provide you with details of when you have been first pre-approved under the Scheme so that you know how much time you have to find a property and enter into a contract of sale.
If you are not able to find a property prior to the end of the 90 days, then your Scheme place reservation will expire.
Is your lender approved for the scheme?
Only participating lenders can offer guaranteed loans under the Scheme.
All participating lenders will have the same eligibility criteria for the Scheme however they may have different lending criteria that needs to be met.
You can see the full list of participating lenders by clicking here: List of Lenders
For more information on the Scheme: Click Here
Fact Sheet: Click Here
Source: https://nhfic.gov.au/
