First Home Buyers Loan Deposit Scheme

As part of the election campaign, the Federal Government announced if re-elected, they would introduce the First Home Buyers Loan Deposit Scheme.

The Labor Shadow Treasurer has said if elected they will match the scheme.

How the First Home Buyers Loan Deposit Scheme will work

Whilst at this stage only “broad brush” details are available, the key elements of the First Home Buyers Loan Deposit Scheme are:

Graphic Key Elements of First Home Buyers Loan Deposit Scheme

The Scheme will be targeted at first home buyers
Borrowers will need to demonstrate that they have saved the 5% deposit
The Government will provide Lenders with a guarantee for 15% of the loan amount (meaning from a Lender perspective, the “equity buffer” will be 20%)
It will be available to first home buyers earning up to $125,000 or couples $200,000
The value of the properties which can be purchased is still to be determined
The scheme will commence on 1st January 2020

By providing the guarantee, the Government expects Mortgage Insurance will not be required – which is the case if equity is less than 20%.

Not all Lenders will participate in the scheme

At this stage, it is proposed that the Scheme will only be available through private and smaller Lenders.

The stated intention is to “boost competition”.

No details are available as to who the actual Lenders will be.

It is a Guarantee not a Grant!

It is important to note; the First Home Buyers Deposit Scheme is not a Grant.

The Government simply guarantees 15% of the loan amount – to allow Lenders to approve borrowings for applicants with a 5% deposit.

Borrowers will still be borrowing 95% of the purchase price – which they will need to repay.

Debt Serviceability Criteria Still Apply

Despite the Guarantee, applicants will still need to demonstrate that they can adequately service what they will be borrowing.

With this in mind it is vital to plan ahead to avoid frustrating delays and disappointment!

Summary

Whilst a lot more detail is needed as to exactly how it will work, if the First Home Buyers Loan Deposit Scheme assists applicants get a foothold in the market earlier, then it has merit.

The key rider being, borrowers will need to demonstrate they can service the loan they are applying for.

If you are thinking about applying for a Home Loan and would like to learn more about eligibility criteria call me on 0421 304 990

Chris Anesco

I am an experienced Mortgage Broker and love helping my clients access the finance they need to buy a home, upgrade or undertake renovations.

I enjoy building long-term relationships and undertaking research to find truly market competitive offers. Attention to detail is one of my major strengths.

Chris Anesco is a credit representative (399790) of BLSSA Pty Ltd ACN 117 651 760 (Australian Credit Licence 391237)