As of 1 July 2020, many first time home buyers in Australia will be able to break into the property market with a reduced deposit thanks to the second intake of the Government’s First Home Buyer Deposit Scheme. This scheme enables first time home buyers to pay just a 5% deposit on a property with the Government providing banks with a guarantee of up to 15% of the property’s value.
This scheme means that first time home buyers will be able to avoid paying Lenders Mortgage Insurance (LMI). Additionally, the scheme helps to reduce the burden of having to pay a large sum up front in order to break into the housing market.
However, this also means that people taking advantage of the scheme will be borrowing more from their bank, meaning that the eventual cost will likely be more expensive than paying a higher deposit initially.
The scheme was first made available to 10,000 recipients at the beginning of the year and, as of 1 July, is open to another 10,000 recipients. However, as advantageous as the scheme is, approximately 80% of first home buyers are unsure what the scheme entails and whether they are eligible to apply for it. This is likely because first time buyers are faced with an overwhelming amount of information regarding state and federal schemes, and are unable to wade through the various eligibility requirements.
First Home Loan Deposit Scheme Eligibility
Many people are unsure whether they’re eligible for the First Home Buyer Deposit Scheme. The eligibility requirements for the scheme include:
- Both singles and couples are eligible
- Home loan arrangements made with family, friends or any instance where there is more than one borrower who is not your spouse or de facto partner are ineligible
- You must pass an income test
- For singles, your taxable income from the previous financial year must not exceed $125,000
- For couples, your combined taxable income from the previous financial year must not exceed $200,000
- You must be a first time home buyer, meaning you are ineligible if you have ever owned a property in Australia before
- You must be an Australian citizen
- You must be over 18 years of age
- You must meet the owner-occupier requirements upon the purchase of your home, as the scheme is not open to investment properties
Additionally, there are eligibility requirements regarding the types of properties able to be purchased with the scheme. This includes:
- It must be a residential property
- It must either be an established dwelling or be 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
- It must have a purchase price under the price cap according to its location
For applicants who are intending to purchase vacant land to construct a dwelling upon, a building contract must be entered within six months of the loan settlement date.