Are you a first home buyer looking to get into the property market? Have you saved the 20% deposit required by most lenders? If not, there might be might be a way for you to still purchase a property.
The government is proposing to introduce the First Home Loan Deposit Scheme (Scheme) whereby you will be given the chance to apply for a home loan with a saved deposit of as little as 5%. It is proposed that the Scheme will commence on 1 January 2020.
To be eligible for the Scheme you must:
- be a first home buyer; and
- earn up to $125,000 annually (as a single person) or $200,000 annually (as a couple).
If you are eligible to participate in the Scheme the government will guarantee the first 15% of the amount of your loan. This amount will be guaranteed until the mortgage is refinanced (even if it is with the same lender). Under the Scheme you will save thousands of dollars by not having to pay Lenders Mortgage Insurance.
You may be eligible for the Scheme but still not be approved to benefit for the Scheme. Why? The government will be capping the Scheme at 10,000 borrowers. It appears that the government will prioritise smaller lenders in order to boost competition within the financial services sector and there will be regional caps on the value of the homes for which the government will guarantee a deposit under the Scheme.
It is important to note that under the Scheme you will be borrowing 95% of the purchase price which means that your mortgage repayments will be higher than if you were not using the Scheme.
If you are considering making an application under the Scheme you should seek financial and legal advice before doing so.