Have you heard about the 5% Deposit Scheme?
01 Aug 20
If not...listen up!
You might not think it, but the Australian Government is actively committed to helping younger generations to achieve the great Australian dream of home ownership. And this commitment means constantly thinking of new ways to make it happen.
We call one of these schemes “The 5% Deposit Scheme.” Formally known as: The First Home Loan Deposit Scheme. It exists for this very reason.
And we want to talk about it now, because if you haven’t already heard (though you really should have), it’s Government grant central at the moment! At the time of writing this blog the federal government has released a Homebuilder grant in response to the COVID-19 pandemic. This can be used in conjunction with the First Home-Owners Grant and both can also be used in conjunction with the Defence Force Home Buyer Entitlements. Cha ching!
On the go? Here’s 30 seconds of take outs:
- The 5% Deposit Scheme or First Home Loan Deposit Scheme helps first home buyers purchase their first property sooner.
- Under the Scheme, eligible first home buyers can purchase a modest home with a deposit with as little as 5%.
- Applications for the First Home Loan Deposit Scheme need to be made directly with one of the 27 scheme’s participating lenders.
- One of our Network Partner Mortgage Brokers can walk you through the process.
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The 5% Deposit Scheme
But, before we get carried away talking about all of these grants, it’s always good to get behind the underdog of the Government Schemes / Grants, i.e. the 5% Deposit Scheme or the First Home Loan Deposit Scheme. This scheme was specifically designed to help first home buyers get into the property market sooner.
Typically, first home buyers with less than a 20% deposit need to pay Lenders Mortgage Insurance*. And this can be costly for small deposit home loans. Enter the 5% Deposit Scheme!
How exactly does the First Home Loan Deposit Scheme work?
Under the Scheme, eligible first home buyers can purchase a modest home with a deposit with as little as 5% (lenders criteria also apply).
This is because the National Housing and Finance Investment Corporation guarantees to a participating lender up to 15% of the value of the property purchased that is financed by an eligible first home buyer’s home loan.
What requirements does a Defence Force First Home Buyer need to qualify?
A lender (e.g. bank or credit union) will check eligibility for the Scheme by looking at personal circumstances.
These checks include:
- An income assessment
- A prior property ownership test
- A minimum age requirement
- A deposit prerequisite
- Owner-occupier requirement
- Proof of citizenship
You can check your eligibility here.
How can a Defence Force First Home Buyer apply?
All applications for the First Home Loan Deposit Scheme need to be made directly with one of the Scheme’s participating lenders or chat with your squared away finance broker. It’s worth noting that applications are not accepted directly from first home buyers.
Where to start?
There are currently 27 participating lenders across Australia offering places under the First Home Loan Deposit Scheme. Capital Properties can put you in touch with a Mortgage Broker to walk you through this process.
To find out more, book in to our free Discovery Session today.
We’ll get to know each other, explore your goals and discover property investment possibilities for you based on your current Defence pay rate and lifestyle. You’ll also get a First Home Buyer Pack to take with you, including a copy of my book Property Investment SOP.
So what are you waiting for? Get in touch now.
*Lenders mortgage insurance: Lenders mortgage insurance (LMI) is one of the most popular ways to achieve the dream of home ownership sooner for borrowers that don't have a large deposit. LMI can either be paid upfront or capitalised into the loan.
LMI is insurance that protects the lender in the event that the borrower defaults on their home or investment loan. If the security property is required to be sold as a result of the default, the net proceeds of the sale may not always cover the full balance outstanding on the loan. Should this be the case, the lender is entitled to make an insurance claim to Genworth for the reimbursement of any shortfall.
Where a claim for loss is paid to a lender, Genworth may seek recovery from the borrower, or any guarantor, for any shortfall amount.