25 June 2020

Time to prepare to buy your first home

| Karyn Starmer
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Home buyers

On 1 July, another round of the First Home Loan Deposit Scheme will become available. Photo: File.

Saving for a home loan deposit can be the biggest barrier to entering the housing market.

To help first home buyers, the federal government introduced the First Home Loan Deposit Scheme. It allows first home buyers to purchase a property with as little as a 5 per cent deposit and without the need to take out lenders mortgage insurance.

Under the scheme, the government guarantees the difference between what the first home buyer has saved and the 20 per cent deposit threshold lenders usually require before they’ll provide a loan without mortgage insurance, saving first home buyers as much as $10,000.

The guarantee is limited to 10,000 spots each year and only applies to owner-occupied loans with principal and interest repayments.

The scheme has proven popular with first home buyers under the age of 30 years of age who secured 58 per cent of guarantees in the first offering. Around 12 per cent of guarantees were secured by Australians over the age of 40, an indication the scheme is also helping Australians who are a bit older and may have struggled in the past to get a deposit together.

On 1 July, a further 10,000 guarantees will become available to first home buyers, and given the strong demand for the scheme in the first round, bankers expect they will be highly sought after again.

To be eligible for the First Home Loan Deposit Scheme you must be a genuine first home buyer and have a taxable income of $125,000 or less in the previous financial year. Other conditions include saving a deposit between 5 and 19 per cent and intent to purchase a residential property with a value less than the ACT price cap of $500,000.

Bendigo Bank Mobile Lender Bryan Dacey says first home buyers should prepare now so they are ready when applications open on 1 July.

“Demand is expected to be high so if you are planning on applying, don’t leave it until after the scheme opens. People who are interested should talk to their banker now. They will be able to determine if you are eligible and apply to the National Housing Finance and Investment Corporation for you,” Bryan said.

The First Home Loan Deposit Scheme is a great opportunity for those who meet all the normal lending requirements but are struggling to get their deposit together. The scheme allows customers to avoid having to pay Lenders Mortgage Insurance, which would normally be the case for borrowers with a deposit of less than 20 per cent of the property value.

“Your home loan application will still be assessed like any other, which means you need to be able to meet the lender’s income and expenses requirements and have a sound credit history. You will also need to be able to meet the repayments and demonstrate that you’ve saved at least 5 per cent of the value of the home,” Bryan said.

Bryan suggests first home buyers get their documents together before their first home loan meeting.

“This will include proof of your current income and expenses, details of your employment status and information on any debts or credit cards. Having everything ready will help streamline the process and get you into your first home sooner.”

Bendigo Bank has set up a specialist team to handle enquiries for their customers and can accept applications for the scheme from 1 July. Customers can call 1300 024 701 to register their interest for the scheme

For more information on the First Home Loan Deposit Scheme visit the National Housing Finance and Investment Corporation website.

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