Everything You Need to Know About the Federal Governments 5% Loan Deposit Scheme.
The legislation passed on the 16th of October 2019, setting up a 1 January start for First Home Buyers to purchase their first property with only a 5% deposit and no lenders mortgage insurance charges. It is all conducted by the National Housing Finance and Investment Corporation and applies to new and existing property.
There are still a number of details up in the air… BUT here’s what we do know….
HOW DOES IT WORK?
The Australian Government will be your Guarantor on your first home purchase. This offer is for the first 10,000 first home buyers from the 1st of January 2020, for up to 15% of the property purchase value.
What that means is, if you can come up with a 5% deposit, together with your new found guarantor, you can go to the bank and get a mortgage with a 20% total deposit (5% from you, 15% from the government).
Because you will have a 20% deposit, the banks will not charge you Lenders Mortgage Insurance, which can be significant savings.
Property value = $500,000
Deposit required = $100,000
Guaranteed by Gov, 15% of the 500,000 = $75,000
Needed by you (5%) = $25,000 (minus your 15k first home owners grant) = $10,000
WHO IS ELIGIBLE?
First Homes Buyers (cannot be used for investment) using the First Home Owners Grant (building brand new)?
Single buyers earning less than $125,000 per year
Couples earning less than $200,000 per year
There will also be regional price caps that are yet to be announced. These will determine what type of property you can buy and what the value of the property is.
We still don’t have information on whether the State Governments First Home Owner Grants will be able to be used for the deposit amount.
HOW DO I APPLY?
This is still a grey area, but the short answer is to get your ducks in a row now!
We do know is that this is going to be a first-in best-dressed scenario. If you want to be one of the lucky 10,000 we believe you will need to have your finance application in by the end of the first week of January.
It appears the applications will be done through your selected Bank, who will have separate products which incorporate the government guarantee. Each bank will have their own hurdles to jump over, but we will have to wait and see what they are.
We expect this will only be eligible for those applying for finance approval from Jan 1st. Which means, you need to have a house and land contract signed and ready to submit your application.
There was 108,000 first home loan applications in 8 months up to August this year, so you can expect this scheme to be in very high demand and we are predicting it will be over in the first two weeks of January.
Can You Help?
Yes. We can help you find the property you love, have all the ducks in a row, including signed contracts, valuations done, and the finance application ready with our finance partners to submit to the banks on January the 2nd.
Get in touch today, and let’s set up a plan.