Owning a home is the ultimate realisation of the great Australian Dream. But in the 2017-2018 period, it was revealed that only around 66 percent of Australian households owned their home. This means that about 34 percent of households in Australia have yet to purchase their own residence. With the end goal of enabling people to own a home, the Australian government introduced the First Home Loan Deposit Scheme (FHLDS), which took effect on 1 January 2020.
The FHLDS programme enables low and middle income earners who are first home buyers to buy a house with only a 5 percent minimum deposit. With a smaller deposit, it’s much easier to purchase a home. Traditionally, mortgage lenders expect a 20 percent deposit for a home loan or, you have to pay lender’s mortgage insurance, which in itself can cost thousands of dollars, adding to the overall costs of buying a home.
Understandably, a lot of people have been
looking forward to the implementation of the FHLDS as the steady increase in
inflation has made it difficult for people without a high income to save for a
home deposit. Initially, the FHLDS aims to process up to 10,000 home loans
every financial year beginning January 2020.
So if you’ve been putting off buying your
own home due to financial constraints, the FHLDS can be the opportunity you’ve
been waiting for to realise your dream of owning a home.
However, just as you need to allocate time for planning a home purchase, you also need to be familiar with the requirements, mechanics and obligations that come with the FHLDS. This is why we put together this handy guide. It’s designed to help you navigate the FHLDS scheme so you can benefit from it.
eligibility criteria and information
As with any government programme,
there are certain criteria FHLDS applicants need to meet in order to qualify.
The FHLDS eligibility criteria are as follows:
- You are an Australian citizen
with your own Medicare card.
- You are at least 18 years of
- You are a first home buyer with
no history of residential property ownership, whether separately or jointly.
- If you are single, you have a
taxable income of up to $125,000 per year.
- If you are part of a couple, you
need to have a combined taxable income of up to $200,000 per year.
- If you are applying as a
couple, you must either be married or in a de facto relationship.
- You need to have a prepared
deposit of between 5 percent and 20 percent of the value of the property.
- Your maximum allowed property
purchase price depends on the suburb and postcode of your prospective property.
- The FHLDS programme only
encompasses owner-occupied home loans paid on a principal and interest basis.
To determine if you are potentially eligible for the FHLDS scheme, visit the National Housing Finance and Investment Corporation (NHFIC) website.
institutions offering the service
Of the various banking institutions in
the country, the only major bank lenders that started accepting FHLDS
applications on 1 January 2020 were the National Australia Bank and
Non-major lenders that began processing
FHLDS applications on 1 February 2020 are as follows:
- Australian Military Bank
- Auswide Bank
- Bank Australia
- Bank First
- Bank of us
- Bendigo Bank
- Beyond Bank Australia
- Community First Credit Union
- Defence Bank
- Gateway Bank
- G&C Mutual Bank
- Indigenous Business Australia
- MyState Bank
- People’s Choice Credit Union
- Police Bank (including the
Border Bank and Bank of Heritage Isle)
- P&N Bank
- Queensland Country Credit Union
- Regional Australia Bank
- Sydney Mutual Bank and
Endeavour Mutual Bank
- Teachers Mutual Bank Limited
(this includes UniBank, the Health Professionals Bank, Teachers Mutual Bank
and, Firefighters Mutual Bank)
- The Mutual Bank
- WAW Credit Union
First-time home buyers looking to avail of the scheme need to get in touch with a home lending specialist to check if they are eligible and find out if slots are available. This is because hundreds of people are lining up for the programme, with 65 percent of the 10,000 quota spots taken during the first month of its implementation. The overwhelming response to the scheme has prompted the government to open a further 10,000 slots this coming July.
A home lending specialist will help
facilitate your registration. All you need to do is to set an appointment
online, via a phone call or by personally visiting your prospective lender. To
guide you further, remember the following steps:
- Go to the NHFIC website to
check your eligibility.
- Set an appointment with your
preferred participating home lending services provider.
- The home lending specialist
will guide you in the documentation process and submit your paperwork for you.
- The home lending specialist will
send a request to reserve a slot in the FHLDS scheme on your behalf and update
you on the progress of your application. Do note that spots are limited and may
not be immediately available unless another applicant decides to not push
through with their application.
- Once you qualify and are
approved for the scheme, you are required to purchase your home within 90 days
- You can now move in to your own
Advantages and disadvantages of the FHLDS scheme for borrowers
As with any home loan scheme, the
FHLDS comes with advantages and disadvantages.
One major advantage of the FHLDS scheme
is that you can avail of it along with the First Home Super Saver Scheme. This
means that you can use your voluntary superannuation contributions for your
For example, if you’ve been making
voluntary super contributions of up to $15,000 every financial year, you can
access that money and use it to pay the 5 percent deposit required in the
programme. If you are single, you can withdraw $30,000 maximum, whereas couples
can withdraw $60,000 maximum. This is a major benefit since approved FHLDS
applicants don’t need to personally spend money, borrow or withdraw from their
savings to make a deposit as they’ll be taking it out of their super
Second, with a deposit of between 5
percent and 20 percent of the purchase price, you won’t have to pay lender’s
mortgage insurance (LMI). This can save you thousands on your overall borrowing
However, there are also downsides to applying for the FHLDS scheme if you do not properly plan for the financial obligations that come with it. Make sure you take note of the following:
- With a smaller deposit, you’re essentially taking on more debt. This means your mortgage repayment amounts will be much higher than they would be if you had a larger deposit for the same property. It’s important to make sure you’re financially stable enough to handle your repayments.
- With a larger loan, you may decide to use the longest possible loan term in order to make your repayments more affordable. Make sure you’ll be comfortable making mortgage repayments 25 to 30 years from now
- Putting down a smaller deposit means you can end up paying more in total interest during the loan tenure.
Also, in the event that you find
yourself substantially increasing your earnings, making a decision to pay off
the loan before it reaches maturity can mean penalties and other fees for
advance payment. This depends on your loan.
types you can buy with the FHLDS guarantee
According to the NHFIC, the types of
residential property approved FHLDS applicants can purchase include the
- House and land package
- Off-the-plan apartment or townhouse
- Existing house, townhouse, duplex or apartment
- Property on an ‘eligible building contract’
- Land together with a separate home building contract
There are price limits set for home
purchases and they vary by state and region. The price caps set for residential
property in the FHLDS scheme are as follows:
Capital Territory: $500,000
- Sydney, Newcastle, Lake
Macquarie, Wollongong/Illawarra: $700,000
- Other states: $450,000
- Brisbane, Gold Coast, Sunshine
- Other states: $400,000
- Adelaide: $400,000
- Other states: $250,000
- Hobart: $400,000
- Other states: $300,000
- Melbourne, Geelong: $600,000
- Other states: $375,000
- Perth: $400,000
- Other states: $300,000
We put together this list of
frequently asked questions about the FHLDS scheme to ensure you have all the
necessary information as you decide on your next step.
FHLDS first home buyers be subject to higher interest rates?
According to the NHFIC, participating
FHLDS lenders will not charge approved borrowers higher interest rates than
those who are not participating in the scheme.
After approval, will I receive a cash payment?
No, the guarantee you’ll get is not a
cash payment nor is it a deposit for your home loan.
How much will the First Home Loan Deposit Scheme cost me?
The scheme guarantee does not come
with any costs or fees. But you need to know your obligations with regard to
costs relating to your loan and repayments associated with the FHLDS guarantee.
I miss out on this opportunity the first time, can I still reapply?
In case your initial application is
unsuccessful, you can always reapply, as long as there are available
guarantees. As is usual, you need to meet FHLDS application criteria and
requirements. To be eligible for the scheme, you also need to satisfy the
financial requirements and the property you want should be eligible.
What’s the duration of the scheme guarantee’s effectivity?
The FHLDS guarantee stands until the
loan is completely refinanced, you move out or sell your home, or until such
time that the loan principal balance is set below 80 percent of the property
I’m an Australian permanent resident, am I eligible?
No. Only Australian citizens are
eligible to apply for the FHLDS scheme. Couples applying for the scheme also
need to both be Australian citizens and first home buyers.
What if my partner is ineligible for the scheme but I am, will I still get the
As long as you fit the FHLDS
eligibility criteria, as well as the requirements set by a participating lender
as an individual applicant, you may be given a guarantee as an individual home
Can I apply as a single applicant and as part of a couple?
This is not allowed. You need to
decide prior to getting your lender to make a reservation for you if you’ll be
applying as a single individual, or as part of a married or de facto couple.
Does the FHLDS have a waiting list for places covered by it?
There is no waiting list maintained
for places under the FHLDS scheme. Also, applications cannot be lodged directly
with the NHFIC. All applications need to be coursed through participating lenders.
Is it possible to apply with more than one lender?
You can apply through more than one
participating lender, but you can only have one place in the FHLDS scheme.
applicants allowed to use brokers?
Yes. Borrowers who are eligible can
get a guaranteed loan from a registered mortgage broker, as long as the broker
has a partnership or relationship with the participating lender you are using.
read that I need to make a minimum deposit of 5 percent from my genuine
savings. What does this mean?
In general terms, genuine savings are
savings you have accumulated or kept over a period of time. But this can only
be established by your lender for the purpose of using the scheme.
What information or documents do I need to provide my lender during the
For your lender to be able to reserve
a place for you under the FHLDS scheme, you need to provide them with the
- Complete legal name as it
should appear on the property title
- Date of birth
- Notice of Assessment (for the
2018-2019 income year) issued by the Australian Taxation Office
To ensure your application goes
smoothly, you need to prepare the above items and present them during your
initial meeting with your lender. Also, be prepared to provide other details and
documents that your lender might request for the purpose of meeting their
Do I need to reapply if my scheme place reservation expires?
Yes. You need to reapply to secure
another scheme place with a participating lender. Also, you can only reapply if
there is a scheme place available when your lender submits your application.
Is the eligibility criteria for the FHLDS the same for all participating
Yes, definitely. But lenders will have different lending criteria.
The FHLDS scheme is the federal
government’s programme designed to help eligible applicants buy their first
home. If you have more questions, please reach out to participating lenders and
get your questions answered.