Government First Home 15% Deposit Scheme

It’s time to start making contact with your First Home Owner database –  Why? The First Home Loan Deposit Scheme will come into effect from 1 January 2020.

So how does it work?   
The National Housing Finance and Investment Corporation Amendment Bill 2019 (NHFIC) has passed the Senate is now law. The “approved information” about the scheme is not yet available as we wait for more details to be announced before the Scheme launches on 1 January 2020, the general consensus in the industry is:

You will need to be a first home buyer earning up to $125,000 ($200,000 for a couple) a year or less.
The scheme is limited to 10,000 borrowers per financial year – Australia Wide.  This means that in 2020, there is TWO opportunities to receive this assistance. Indication is that the scheme is not just limited to newly-built or off the plan purchases and will most likely be available to first home buyers of established, previously lived in properties.  Each State or Territory will have a definition of “eligible” homes (which also includes price eligibility or “property value caps”) and in Queensland, will range from $400,000.00 to $475,000.00 depending on where the property is located.
In a nut shell, if a First Home Buyer has saved 5% of the property value* the government will guarantee the remaining 15% of the deposit (so a total contribution is 20% to help avoid Lenders Mortgage Insurance).   The First Home Buyer/s will need to qualify for an owner-occupied loan with principal and interest repayments with loan not to be more than 30 years in term.  There is to be no more than two borrowers per loan and borrowers must be the spouse/de facto partner of the other borrower. The Government guarantee will end once the loan/property value is less than 80%.    There is still no advice on what happens if the property is sold when the value is still more than 80% but a guess would be nothing is repayable as loan is effectively discharged when property is sold.
*market value (ie Contract Price) or Bank Value??  One of the questions that needs to be answered.

In summary, a First Home Buyer (couple) ** looking to purchase a brand new unit/house for $450,000.00, has a combined income under $200,000.00, has saved $22,500.00 deposit and is eligible for:

  1. First Home Deposit Scheme;
  2. Stamp Duty Exemption (provided they live in property for 12 months following settlement) NIL = Saving $7,000.00 (as opposed to PPR) 
  3. Payment of FHOG Grant (brand new property) $15,000.00

 They will save a whopping total of $22,000.00 plus Government Deposit Scheme Contribution

** Australian Citizens or Permanent Residents

CCQ will be watching with interest what the “fine print” states when further information is available however, it is certainly worth letting your First Home Buyers know they will need to be ready to grab one of the 10,000.00 spots this scheme will release come 1 January 2020 and then another round after 1 July 2020.
If you are a broker, may be time to get a pre-approval application underway in readiness also.