As part of the Federal Budget 2021-2022, the government will extend the popular First Home Loan Deposit Scheme (New Homes) or FHLDS (New Homes) providing an additional 10,000 places in 2021/2022.
The scheme was launched last year to assist First Home Buyers get into the property market but also support the new home construction industry. The scheme has been incredibly popular with many First Home Buyers missing out on a place and joining the queue on a waiting list.
Now that the government has announced extending the FHLDS (New Homes) scheme, the competition for getting one of guarantees will be strong. To avoid missing out, now is the time for First Home Buyers to start preparing their finances and speaking with a mortgage broker like Mint Equity so they are ready to lodge their application on 1 July 2021.
What is the First Home Loan Deposit Scheme (New Homes)?
Under the FHLDS (New Homes), first home buyers can build or purchase a new home, including:
newly-constructed dwellings
off-the-plan dwellings
house and land packages
land and a separate contract to build a new home.
Normally, a first home buyer would need to pay Lenders Mortgage Insurance (LMI) if they don’t provide 20% deposit for the property purchase. Under the scheme, the Australian Government provides a guarantee on an eligible loan.
The guaranteed amount is the difference between the first home buyer’s deposit (of at least 5%) and 20% of the value of the eligible property. It is similar to parental or family guarantees which already exist, but in this case the Australian Government acts as the guarantor.
By providing this guarantee, an eligible first home borrower won’t need to pay LMI, which is a significant saving on the amount of cash the first home buyer needs to get into the property market.
The FHLDS (New Homes) is only available for purchasing a brand new home or build.
Am I eligible for the First Home Loan Deposit Scheme (New Homes)?
The First Home Loan Deposit Scheme is open to singles or couples.
Singles
If you are looking to purchase your first home as the only person named as a borrower in your home loan, then you would apply under the Scheme as a single.
Couples
If you are looking to purchase your first home with your spouse or de facto partner, where you are both named as borrowers in your home loan, then you would both apply under the Scheme as a couple.
These are the only two types of applications that are eligible under the Scheme.
Home loan arrangements made with family or friends, with more than two borrowers, or any instance where the other borrower is not your spouse or de facto partner, are ineligible for the First Home Loan Deposit Scheme.
Income test
The Scheme includes an income test for:
singles – your taxable income for the previous financial year must not be more than $125,000.
couples – your combined taxable income for the previous financial year must not be more than $200,000.
The income test is assessed by your lender.
Prior ownership test
The Scheme is in place to assist genuine first home buyers.
The prior ownership test requires you to not have ever owned:
a freehold interest in real property in Australia
an interest in a lease of land in Australia with a term of 50 years (or more), or
a company title interest in land in Australia.
The scheme is only available to current Australian citizens over the age of 18 years.
NSW FHLDS New Homes Price Caps
Can I use gifted funds or superannuation as my 5% deposit?
No, the 5% deposit must be made up of genuine savings. That means you’ll need to show a gradual savings pattern where you have accumulated the deposit amount.
Speaking with an experienced Central Coast mortgage broker will help clarify if you are eligible and the mortgage broker will be able to assess your borrowing capacity to ensure you qualify for the home loan with the participating lender.