The first home loan deposit scheme was first launched in January 2020. If you want to buy a property with a small initial deposit and without the lenders mortgage insurance(LMI), the first home guarantee scheme is for you.
To get a loan without LMI from the commonwealth government, you need to have a specific amount of savings with you. Once the government describes the difference in your savings and the 20% deposit threshold lenders, the loan is approved.
For instance, let's suppose you are buying a house for $600,000. However, you have saved up only $50,000 for the first installment. The government will guarantee the first $70,000 deposit. It will increase your savings amount to $100,000, which is 20% of the total property value. It excludes the government fees for stamps and other things.
In this way, the government plays the role of guarantor for the first home buyer loan. From July 1, 2022, onwards, the scheme will be extended to 35,000 places every year.
FHLDS new home guarantee
A new home guarantee is a new venture by FHLDS launched during the covid-19. The scheme is quite similar to the older one with one significant difference, that is it applies only to new properties. So, now you can buy your first properties or already-built homes with as little as a 5% deposit.
In the financial year 2020 and 2021, there were 10,000 places available in the scheme. The best part is you won't have to take any LMI for your house's downpayment.
What entails in the 'new home?'
- Any newly constructed house is a "new Home." It can be an apartment, freestanding house, a townhouse etc.
- Unplanned or random places can also be bought.
- You can also buy a property of your choice with a contract to build a new house.
- House and land packages also come under this category.
If you pass all the criteria for an eligible first home buyer, you won't have any trouble getting the deal.
What makes anyone an eligible first home buyer?
The criteria for an eligible first home buyer are the same as it is for an FHLDS home buyer. The person has to be 18 years or above. You can buy it with your spouse or partner too. You must never have previously owned any property in Australia as an owner or an investor.
Besides these, you will have some conditions to pass when it comes to your salary, home loan and property too. These requirements are:
- Property Requirements
For the new home guarantee, the buyer will either need to build a new dwelling or buy a new build apartment, house etc. You can't buy old or already established places with this loan.
There is a threshold for property value which can be bought by the first home buyers. However, the prices differ for regional and metropolitan areas.
For the scheme, a regional center encloses any area with a population above 250,000. It includes the Sunshine Coast, the Gold Coast, the Illawarra and Geelong, Newcastle, and Lake Macquarie.
Buying as a single or a couple
Both single and couples can buy the properties with an NHG scheme. However, you don't pass the criteria if you are buying the property with anyone other than your partner like your parents, siblings etc. You can only buy the property with someone you are married to or are in a live-in relationship with.
This is an important criterion for an FHLDS new home guarantee scheme. If you are single and buying the house alone, you need to have a salary of $125,000 for the last financial year. This should be mentioned in your ATO(Note of Assessment). If you are buying with your spouse, you must have a combined taxable income of less than $200,000.
How much deposit you should have?
You should have a saved capital of at least 5% of the deposit. The savings have to be "demonstrated savings" as the bar is fixed by the government.
Principal and interest loan
Generally, Your loan is a principal and interest home loan for the entire guarantee period. The exception is if the loan is for both vacant properties and the construction of a new house. In such cases, interest-only loans are qualified for first home buyers while the construction of the home.
You will need to purchase the house you are constructing because the new home guarantee(NHG) scheme is available for owners only.