Let’s face it – it seems like it’s getting harder and harder to get into your first home.
You’ve been saving for a while. You want to save a good deposit, at least 20%. And you’re not quite there yet, because that’s likely upwards of $80,000 (on a $400,000 house).
But thanks to the Australian Government’s new First Home Loan Deposit Scheme (FHLDS), your first home might be in reach sooner than you think, and P&N is proud to be one of the lenders participating in the scheme.
The FHLDS is designed to help first home buyers to reach their home loan dreams sooner.
For approved scheme placeholders, the Australian Government will provide a guarantee to the bank, allowing first home buyers to buy their first home with a deposit as little as 5%, without needing to pay a Lenders Mortgage Insurance fee (LMI). LMI is a type of insurance to protect the bank because of the large amount being borrowed and on a $400,000 property, could cost anywhere from $3,500 to over $12,500.
Essentially, the Government will guarantee up to 15% to bridge the gap between the borrower’s saved deposit and the 20% deposit required to avoid the LMI fee.
The FHLDS kicked off at the start of 2020 and offers 10,000 places to eligible borrowers this financial year.
Normally, if your deposit is under 20% (that’s the $80,000+ we were talking about), you’d need to pay the LMI fee. First home buyers now only need to save only 5% of the property price (reducing the $80,000 deposit to avoid the LMI fee to $20,000), shaving years off the time it takes to get a deposit together. Under the scheme, the Government will guarantee the difference, eliminating the need for LMI.
Plus, in ordinary circumstances, with only a 5% deposit you could potentially have to pay the LMI fee upfront, as the value of the property plus the cost of LMI and other fees may end up exceeding the threshold of what we can lend to you.
By eliminating the LMI fees, it could potentially save you tens of thousands of dollars.
Remember – this is a guarantee only, it’s not a cash payment towards your loan. Your loan value will still be the full amount of the property plus applicable loan fees, less your deposit amount.
To be eligible you’ll need to be a first home buyer, with an annual income of less than $125,000 for singles and $200,000 for couples. Couples must be married or de-facto. You’ll need to have saved at least a 5% deposit.
Separate to your deposit, you’ll also need to have additional funds to cover stamp duty (though typically waived for first home buyers within certain conditions), as well as any bank fees, legal fees and government transfer fees. You may also need to cover building or pest inspection costs.
If you’re accepted into the scheme, you can purchase a home – which can be a house, townhouse, apartment or house and land package – valued at up to $400,000 in metro WA, or $300,000 in regional WA. The amount varies in other states.
You can purchase either a new or established home. If you’re building a home, you can take still advantage of the First Home Owner’s Grant as well, if you’re eligible.
Talk to us about other options that may be available to you, such as a limited guarantee, or proceeding with LMI if your deposit below 20%.
Ready to get into your first home or would you like further information on the scheme?
If you’re ready to apply, or want to find out more, here’s what you need to do.
Scheme places are first in, best dressed with only 5,000 places available for non-major bank lenders in the current round. However, more places will be released in on 1 July 2020.
Eligibility and lending criteria, fees and charges apply. Terms and conditions apply and are available on request.
Any advice given is general only and does not take into account your personal objectives, financial situation or needs.
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