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What is the First Home Loan Deposit Scheme?

May 28, 2019

If you're one of the many Australians dreaming of owning your first home, you were probably thrilled to hear of the new First Home Loan Deposit Scheme announced during the Federal Election campaign.

But with the dust now settled on the politics, what does the new policy mean for you and what impact could it have on the property market?

Under the new rules, first-time buyers can now buy their own home with a deposit of 5%, as opposed to the usual 20% deposit required. The loan will be guaranteed by the National Housing Finance and Investment Corporation.

According to the Coalition, the scheme will mean Australians can get a loan and into the market faster. It will also help first home buyers save many thousands of dollars by not having to pay Lenders Mortgage Insurance.

The new policy is set to come into effect from January 1, 2020, and is available to first home buyers earning up to $125,000 annually or $200,000 for couples. It is also limited to 10,000 first home buyers.

The First Home Loan Deposit Scheme shouldn’t be confused with the First home super saver (FHSS) scheme that was introduced by the Australian Government in the Federal Budget 2017–18 to reduce pressure on housing affordability.

The FHSS scheme allows you to save money for your first home inside your superannuation fund. This will help first-timers save faster with the concessional tax treatment of super.

You can use the FHSS if you are a first home buyer and either live in the premises you are buying or intend to buy it as soon as practicable. It’s also available to first-time owners intending to live in the property for at least six months within the first 12 months of buying it.