If you are looking to buy a property to make it your home, but are wary due to the ongoing Covid-19 pandemic, fear not as there are several government grants and schemes available to support first home buyers at the Federal as well as State level. There are merits to increasing your awareness about these programs. One such scheme is the First Home Loan Deposit Scheme. Read on to know more.
Most lenders would require you to make a deposit in a separate savings account. The amount of deposit varies from 2%-5% of your property value also known as the Loan to Value Ratio (LVR). A larger deposit of around 20% will help you save tens of thousands in Lenders’ Mortgage Insurance (LMI). You can make the most out of this provision after discussing with your mortgage broker.
The federal government has launched a scheme under which eligible first buyers can get a home loan without paying money for Lenders Mortgage Insurance (LMI). Under this scheme, the government will act as the mortgage insurer thereby guaranteeing home loans for eligible First home buyers, thus you can avoid LMI by paying up to 5% deposit. This is because the government is guaranteeing the difference amount (less than 20%). Thus, First home buyers can save anywhere between A$10000 to A$30000 in LMI fees based on maximum regional price cap as part of this scheme. The additional advantage that one gets is that Eligible First Home Buyers will be able to leverage other government schemes and grants such as the First Home Owners Grant, First Home Super Saver Scheme and stamp duty concessions.
This scheme was started by the government on 1st January 2020 with 10,000 scheme places, and an additional 10,000 places have been made available from 1st July 2020 for the financial year of 2020-2021.
The government amended the scheme, such that home buyers wishing to avail FHLDS need to provide their Notice of Assessment from the ATO, effective from 1 July 2020. If you are quick to file your tax return with the ATO, then you can jump ahead in the queue and secure one of the elusive spots. You could easily do that, since most people don’t file their tax returns before 31st October 2020 and the date of filing could be extended up to 15th May 2021.
The first home loan scheme is primarily aimed at helping first home buyers from low and middle income groups purchase their dream property by eliminating the LMI fees saving the borrowers tens of thousands of dollars. There are limited slots and a higher number of First Home Buyers and it is believed that only one in ten First Home Buyers will be able to utilise the scheme. Thus, it would be prudent for all interested first home buyers to apply for the scheme at the earliest.