Guide to first home loan deposit scheme.

Who can qualify for the First Home Loan Deposit Scheme?

Your two-minute FAQ guide to the First Home Loan Deposit Scheme

Whilst seasoned campaigners understand the inherent dangers in a property purchase, first home buyers tend to jump into the great unknown and subsequently wonder what they have done to themselves when the purchase is made. It can be daunting.

Recent tax cuts introduced by the Federal Government and rate cuts from the RBA are encouraging home buyers, particularly first home buyers, to enter the property market.

Now the government is introducing a new scheme to further support some low and middle income earners buy their first property. The scheme is designed to replace lenders mortgage insurance for borrowers who have just a five per cent deposit. There are only 10,000 places available in this scheme that Scott Morrison announced during his election campaign.

But there were 108,000 first home buyers in Australia last year. So who gets a helping hand from the government to get into their first home?

What is the First Home Loan Deposit Scheme?

What may make it less daunting is the introduction of the First Home Loan Deposit Scheme. This scheme enables eligible first-home buyers on low and middle incomes to purchase a home with a 5 per cent deposit.

There are benefits.

The time it takes to save for a deposit will be narrowed. Property price caps should ensure potential home owners don’t overextend and those previously excluded from home ownership may now actually be able to enter the market.

What are the limits of the First Home Loan Deposit Scheme?

There are more than 100,000 first home buyers per calendar year, yet the scheme only allows for 10,000 guarantees to be allocated each year starting on 1 January, 2020.

According to Domain economist Trent Wiltshire there have been 108,000 first home buyer commitments during the past 12 months.

“With prices now rising again in most cities, people would be keen to use it to get their foot in their door. How do you ration that to people?” Wiltshire says of the guarantee cap.

The scheme has income limits for applicants of $125,000 for singles and $200,000 for couples. Most first home buyers will fit under those limits and all be vying for 10,000 guarantees under the Scheme.

What is the First Home Loan Deposit Scheme?

What may make it less daunting is the introduction of the First Home Loan Deposit Scheme. This scheme enables eligible first-home buyers on low and middle incomes to purchase a home with a 5 per cent deposit.

There are benefits.

The time it takes to save for a deposit will be narrowed. Property price caps should ensure potential home owners don’t overextend and those previously excluded from home ownership may now actually be able to enter the market.

What are the limits of the First Home Loan Deposit Scheme?

There are more than 100,000 first home buyers per calendar year, yet the scheme only allows for 10,000 guarantees to be allocated each year starting on 1 January, 2020.

According to Domain economist Trent Wiltshire there have been 108,000 first home buyer commitments during the past 12 months.

“With prices now rising again in most cities, people would be keen to use it to get their foot in their door. How do you ration that to people?” Wiltshire says of the guarantee cap.

The scheme has income limits for applicants of $125,000 for singles and $200,000 for couples. Most first home buyers will fit under those limits and all be vying for 10,000 guarantees under the Scheme.

There are several issues to sort through before the Scheme is rolled out, including whether the guarantees go out in one lot or are evenly distributed across a number of months and who will actually be included/excluded.

The first burning question about the scheme was answered this week: where will the property cap sit for each State and Territory?

See the answer below:

Price caps for First Home Loan Deposit Scheme

All in all, the Scheme should have the desired effect: stimulate the market further and bring in first home buyers. If this occurs, it is once again likely to drive up costs at a time when the market is already rebounding.

Do I still need my own loan under First Home Loan Deposit Scheme?

Yes you will need to organise your own finance with a lender that is aware that you are approved for the scheme. More details about the scheme and how it works and how to apply will be released by the government in coming weeks.

You can go direct to a bank or other lender for a loan or use a broker or find a great value loan yourself on a comparison site like InfoChoice.com.au.

InfoChoice has more than 1,800 home loan products and a total database of 145 institutions.

Compare home loans from Australia’s banks, credit unions and other lenders at InfoChoice.

The information contained on this web site is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser. If you or someone you know is in financial stress, contact the National Debt Helpline on 1800 007 007.

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