29 Jul How to Use the First Home Loan Deposit Scheme
First Home Buyers in Melbourne are in an enviable position at the moment, with a number of Government incentives available to help them get into a home sooner.
One of the best options for FHB’s in Melbourne is to look at utilising the First Home Loan Deposit Scheme. The first point of contact should always be speaking with a mortgage broker in Melbourne as they will be able to quickly assess whether you are going to be eligible for the program.
What is the First Home Loan Deposit Scheme?
The First Home Loan Deposit Scheme is a Government-backed program that allows FHB’s to take out a loan to buy a home with less deposit than what they would normally require.
As a general rule, a lender will require a home buyer to put down a 20 per cent deposit as a safety net for the lender. This protects the lender against a fall in house prices, or also in the event the borrower gets into financial trouble and can’t repay the loan.
Borrowers can normally access loans that have a higher loan to value ratio, such as 90 per cent, however, in these instances, banks will require lenders mortgage insurance (LMI) to be paid. LMI can be expensive and is ofter more than $10,000, which can be inhibitive to many first home buyers.
As a result, the Federal Government introduced the First Home Loan Deposit Scheme, whereby, a first home buyer can purchase a home with as little as a 5 per cent deposit and the Government will act as a guarantor on the difference between what you are able to contribute and the standard 20 per cent deposit.
The additional benefit of the First Home Loan Deposit Scheme, is that it can also be used in conjunction with a number of other first home buyer incentives, meaning you could be able to get into a new home far quicker than you might have been able to if you had to save a 20 per cent deposit.
It’s important to speak to your mortgage broker in Melbourne about this program because there are a few important things you must consider.
How to Qualify for the First Home Loan Deposit Scheme
To be eligible, properties must be valued under $600,000 in Melbourne or other regional centres or $375,000 in smaller regional Victoria.
There are also salary limitations, in that you must earn less than $125,000 as a single or $200,000 as a couple. The loan must also be only for owner-occupiers and not investors.
The really important thing to consider here though is that you will still need to come up with 5 per cent in genuine savings. So while you can theoretically access things like stamp duty exemptions and the first homeowner’s grant, you still need to have saved up that deposit initial deposit.
However, as we all know, saving a 5 per cent deposit is going to be far easier than trying to save a 20 per cent deposit. Meaning that you can quickly get into a home thanks to this Government program.
Each financial year the Commonwealth Government makes 10,000 grants available, of which NAB and CBA have access to 5,000, while the remainder are spread across the smaller lenders.
Talking to a mortgage broker in Melbourne is vital at this stage of the process because you will still need to be able to qualify for a home loan. Which means all the normal considerations should still be in place – such as having enough income to service the debt.
Even if you don’t qualify, for the First Home Loan Deposit Scheme, there are still opportunities to enter the property market using tools like LMI or even a guarantor loan.
The best place to start for first home buyers is always speaking to a mortgage broker in Melbourne and letting them assess your options and finding the right solution for your personal situation.