First Home Loan Deposit Scheme and How You Can Benefit
Listen in as Inspire Realty Founder & CEO Colin Lee discusses how the NHFIC will release another 10,000 First Home Loan Desposit Scheme places for the next financial year from 1 July 2020.
Please see below for the full transcript of this video
Hello and welcome to our live broadcast. My name is Colin Lee, the CEO and founder of Inspire Realty. Just want to have a quick shout out to a lot of my family and friends out there. Now this week has been an intense week. I’ve had a lot happening this week. Certainly been getting a lot of questions and interest about the home builder scheme that has been announced recently, but also a lot of questions about the first home loan deposit scheme. So what I want to do now is I just want to unpack a little bit more of the FHLDS today and really look at how you can benefit from this scheme if this applies to you.
There is a lot of information out there. So what I also want to do is I’m going to be summarizing orattempting to summarize a lot of what I’ve learned about the FHLDS as well and also I answered some questions about what I’ve been listening to and getting a lot this week, which has been great. So I’d like to share with you, I guess a little bit more about what we do as a company. So I’m going to be sharing my screen. So if you just bear with me a second there we go. Hopefully you can see that. So yeah, we’re a team of property professionals are very passionate people about property. Idea is to help our clients build a better future together. If you want more information, please visit our website www.inspirerealty.com for more information.
For the purposes of what we’re going to be doing today, I’ve just been getting so many questions, so I thought it would be easier for me. Just to put together a quick presentation about the first home loan deposit scheme or short for it is FHLDS so I’ll be referring to FHLDS occasionally throughout my presentation. Which will only be for about 10 to 15 minutes. So it’s a fairly short one, just a very power packed session full of key information and takeaways that you can check and see if it applies to you. If you want to read more information about the FHLDS, feel free to download the fact sheet. The website is advertised already at the bottom of my screen. Sorry, there was a little thing there. So yeah, feel free to download the fact sheet and read up a lot more information. What I what I wanted to go through today is just some bad news and some good news. And the bad news is that if FHLDS places the 10,000 places which the scheme started in on the first of January 2020, this year, the 10,000 available spots has already been taken up. So you know, if you are interested in this, I encourage you to contact us a little bit more to see if you can actually apply for the scheme and all the places have been allocated but sometimes places may become available. Because obviously if you apply for a spot in this scheme, you have to go ahead with the purchase of the property. So there may be a few people that will drop off. But having said that, the good news is that the first home loan deposit scheme will be out again, the 10,000 spots will be reallocated from the first of July this year for until the next next year, first of July, so it’s really for the financial year, so there’s another 10,000 spots. So if you’ve missed out the first 10,000, which have been allocated, you can certainly get your ducks in a row now and start to look at putting your your application in for the next 10,000 spots. Seize this opportunity while you can while it’s available for the taking.
So just a quick snapshot in terms of what I’m going to be covering today, I’m going to be sharing some very good news. And I’ll touch on that a little bit. But I’m also going to be just for the benefit of those that don’t really know too much about the FHLDS. I’ll be just going through very quickly what it actually is why the scheme is put together. And also put together a couple of case studies. One of, you know, a client that I’m talking to in New South Wales, and another case study in Queensland. Also I’m going to be just covering off very quickly, some eligibility criterias and also some property thresholds. So unfortunately, this scheme only applies if you buy a property within a certain price point as well. And then some very quick FAQs as well, just some very frequent or commonly asked questions that I’ve been getting over the week.
So the very good news, here is the very good news. The first home loan deposit scheme actually works in conjunction with the other grants and schemes. So the first home owner grant or FHOG, that actually applies in conjunction with this scheme as well together with the first homebuyers assistance scheme. That is really your exemption or partial exemption from stamp duty or transfer duty. If you bought a if you buy a property within a certain price range once again, the The other thing that it works together with is also your first home Super Saver scheme or FHSSS. A lot of these acronyms isn’t it. So hopefully you’ll be familiar with it by the time I finish, and also the recently announced first, the homebuilders scheme. So the FHLDS works in conjunction with all these other grants and schemes, so feel free to have a chat with me or one of my team members to see if you qualify for all of them. I’ve been working with clients that qualify for some of them. Obviously, you’ve got certain thresholds and eligibility criteria you will need to meet in order for you to qualify for all of them.
So just very quickly, the FHLDS is really an Australian government initiative, really support. It’s been created, really to support first homebuyers to purchase their homes a lot sooner. So if you’ve been waiting on the fence, or you’ve been sitting on the fence for a while thinking whether you should buy a property or not, or you’ve been just frankly, you know, trying hard to save up for your 20% deposit. You know, this is a good opportunity to look at how this can benefit you. So, traditionally, if you’re a property purchaser, banks will traditionally lend you 80% of your value of the property without charging you what we call Lenders Mortgage Insurance. And I can show you roughly how much that that costs on a on a certain price of a property, we’ll go through the case study. But the idea here is that you know, you don’t have to save 20% deposit. The The idea is that if you can save up to 5% deposit, you need to have genuine savings of 5%. deposit, the government essentially will cover the other 15% or guarantee the other 15% I suppose it’s a bit like a family or parents will guarantee, therefore, you know, you only need 5% to enter into the contract. What that means is that you’d be borrowing up to 95% of the purchase price of the property. Now, just for the simplicity of what I’m going to be talking about the, you know, LVR I’m going to introduce you another concept for the benefit of those that don’t know LVR means loan to value ratio. So for argument’s sake, let’s say it’s a million dollar property 80% LVR means that you’re borrowing 80% of the value of the property, which means you’re borrowing $800,000 from the bank, and you’re providing the 20% deposit, which is $200,000. In this case, you don’t need $200,000 you need the 5% of the million dollars, which is $50,000. So as long as you can save 5%, you’re able to enter into a contract. If you qualify for this FHLDS scheme, obviously.
The scheme has is really a guarantee and the guarantor really is the National Housing Finance and Investment Corporation, or NHFIC. For short, that they are the ones that guarantee that 15% of the value of the property, just something to be clear, it is not a cash payment or deposit that’s paid by the NHFIC. It’s really there as a platform to guarantee you that amount so you don’t have to pay the Lenders Mortgage Insurance. At the moment, there are about 27 participating lenders and banks across Australia that’s offering the ability for you to enter into the FHLDS. So, you if you want more information, certainly speak to me about it to see if you qualify. Obviously, there are quite a number of lenders and banks that would allow you to get into that scheme.
So just wanted to quickly look at a case study of a client that I’ve had some conversations with this week. So she is looking for property really, as a first home buyer, she’s a single person. Traditionally, if she wanted to buy this property, let’s let’s say it’s about $650,000. It was just a little bit under, but just for argument’s sake $650,000 property. Traditionally, if you wanted to buy this property, and not pay Lenders Mortgage Insurance, she’ll have to save up a total of about $130,000. That’s about 20% of $650,000. In order for her to, you know, look at the purchase or consider the purchase. Under the scheme, you only need 5% deposit which means you need about $32,500 saved up. The good news about this particular property is that there is no stamp duty payable. As long as you buy a property under $650,000. There’s no stamp duty payable. Obviously, there is a partial exemption if you buy a little bit more, but I’m not here to talk about the the transfer duty or the stamp duty exemption today. She also qualifies for the first home owner grant. And that’s a $10,000 grant by the New South Wales Government and she’ll certainly receive it after her settlement of the property. So, if you look at this chart, really, the property value is 650,000. A 5% deposit would mean that she puts the $32,000 into the deposit Therefore borrow $617,500 for the property. So what I’ve done is I’ve just looked at some quick figures for her. Obviously, you’ve got to include bank and legal fees. So these are the fees and charges you need to really be mindful of when looking at purchasing your first home. So bank and legal fees $2,000, the government transfer fee $287, little small amount. So really the deposit that you would normally need would be about $51,000. If you’re borrowing 95% from the bank, that’s because they will be you know, I’m just using ANZ as an example. But if you’re borrowing 95% of the loan, you would be charged with a fee of $26,569 for your Lenders Mortgage Insurance fees. So with this scheme, you don’t have to pay that because the government’s guaranteeing that that 15% You’re still putting that 5% in. So what that really means is $51,000 minus that $26,000 mortgage insurance fees. With just under $25,000, you can actually afford to purchase a $650,000 property here in New South Wales. The criteria is that if you’re going to be borrowing $617,500, you will still need to show and and you’re able to service that loan. So just be mindful of that as well. Unfortunately, there’s just not a lot of properties that are under 650,000 within the capital cities, but there are certainly some options which I can show you should you be interested in having a look at some of those options.
Then I’ve got another client also has been asking about Queensland, and for the purposes of what I’m doing, I there’s no way I can cover all states. But I’m just going to use another example for Queensland. Queensland has a slightly different rate for the first home owner grant. So this is another really good example. The property value is exactly $475,000, which is great. So the 20% traditional amount that you would need to to get into this property if you’re a first time owner, imagine trying to save $95,000 for this property which constitutes 20%. So you don’t pay the Lenders Mortgage Insurance fee. For a lot of people that takes a long time to save, but under the scheme 5% of $475,000 All you need is $23,750. And the good news is when you purchase of property in Queensland, under $500,000, you also don’t pay any stamp duty or transfer duties, which is great. You do qualify for the $15,000. So you qualify for the $15,000 first homeowner grant being a first home purchase. So really, when you look at the mechanics of it, it’s a $475,000 property the total loan that will be required. At 95% loan to value ratio would be $451,250, which means a 5% deposit of $23,750. So really, you add the bank and legal fees once again, the government transfer fees in Queensland a little bit higher. So the suggested deposit on normal cases would be 27,936. That’s if you pay the Lenders Mortgage Insurance fees, obviously. So under this scheme, the government guarantees the 15%. And therefore you don’t have to pay the $15,740 which means you know, with just over $15,000 In this instance, you’ll be able to enter into, you know, contract with this property to purchase the property, which is under $475,000. Sorry, I made a mistake there. Once again, you’ve got to be able to qualify to get a loan for you know, $451,250 so just because the government guarantees you that 15% doesn’t mean you, you, you qualify straightaway, you’ve got to make sure that you have the capacity to service a loan for $451,000. So I hope that’s a little bit clear. If you need more information, once again, please feel free to get in touch with us. I’ll give you some links later on to download some guides as well.
So here is your eligibility. Let’s see if you qualify for the scheme. The scheme is open to singles or couples. If you’re a single, as long as the loan is in your name, you will qualify for it as long as you meet other criterias as well. If you are a couple, you have to be married, obviously, with your spouse or your de facto partner. And the contract needs to be in both names obviously. What it doesn’t apply to family of friends with two or more borrower. So you can just put you know s few people on the contract needs to be a spouse or defact partner. So if they’re not your spouse or partner, unfortunately, you will not be eligible for this. So, if you’re a single or a couple, you know this is for you.
There are about six things that the FHLDS would require for you to meet in terms of the test requirements before you qualify. Firstly, it’s your income, test your prior property ownership, your citizenship status, your minimum age, your deposit requirement as well and your owner occupier requirement for getting into this scheme. So I’m just going to touch on it very, very quickly.
Income so if you’re a single person and you’re earning under $125,000 in last year, financial year, you will qualify if you’re a couple your combined taxable income has to be and this is gross has to be under $200,000 combined in order for you to qualify for the FHLDS. So really for first home buyers to get into a modest property.
In terms of your prior ownership of properties, it is really there to assist and genuinely assist first home buyers. So you will not be eligible for this if you have a freehold interest in real property in Australia, or you have an interest in a lease of land in Australia with a term of 50 years or more, or a company titled interest in land in Australia. So once again, as long as you are there as a genuine first home buyer you will qualify for this
Citizenship. Now this is very tricky because I had my client one of my client is an Australian citizen and his partner is not an Australian citizen. So you’ve got to be an Australian citizen. Obviously, if you know that you’re going to be getting your Australian citizenship as long as you get it before you enter into the home loan, you will qualify for a couple. Unfortunately, you will both need to be Australian citizens in order to qualify, this scheme does not. It’s not available for you if you’re a permanent resident. So that’s a bit unfortunate. But yeah, if you’re an Australian citizen, this is good to go for you.
Minimum age, it’s only open to persons of 18 years or over. The the caveat is that you must be 18 years old or over at the time of entering into the home loan. So if you’re getting if you’re almost turning 18, and you’re keen to look into some options, as long as you enter into the home loan, when you turn 18, you’ll qualify
The deposit requirement. Now this is very important. You have to have at least 5% of the value of the property that you’re looking at. And this has to be made up of genuine savings. What that means is when you go apply for a loan, you will need to submit your bank statements and in your bank statements or account will need to be able to see that you’ve been saving for, you know, for a little while, and then you have that 5% deposit in your in your account. And it’s not just a gift that’s, you know, suddenly transferred into your account prior to entering into the contract. So that’s very important, you got to make sure you have the 5%. And then if you have 20% or more, I mean, it’s you know, if you have 20% or more, you probably don’t even need the scheme anyway. But then your your home loan will not be covered under the scheme.
The owner occupier requirement and I’ve had a number of questions about this, and really it’s there to assist Australians to purchase ther first property so just bear that in mind. Investment properties are not are not eligible for this and it’s not supported by this scheme. As an owner occupier, there are a couple of things you need to meet. You need to move into the property within six months of the date of settlement Or if later you need to get what we call an OC or occupational certificate. And you need to move in within that time. Or and really, you also need to continue to live in that property as long as your home loan has a guarantee under the scheme. So that’s, you know, something that’s really important just to check in to see if you’re, you do qualify if you do qualify for free to have a conversation with us as well.
There’s one other thing that you need to know the purchase price of the property cannot be more than this cap, unfortunately, otherwise it will not be eligible for the scheme. That’s why it’s important to to know, you know this so that you buy a property within a certain range. I have to admit it is a little bit difficult to find something under $700,000 in New South Wales. You know, I’ve been really looking hard and I’ve got a few options that I’ve been able to present to my clients just last week So that’s been really, really good. So yeah, New South Wales, if you’re New South Wales, the maximum price of the property can only be $700,000 so long as you buy something up to $700,000, Victoria $600, Queensland $475,000, Western Australia, $400,000, South Australia, $400,000 and Tasmania. $400,000. I’m not going to go into the rest of the state, obviously the Australian Capital Territory $500,000 in Northern Territory $375,000 and plus Jervis Bay and Christmas Island, if that applies to you. So just be mindful of the property treshold prices. And last but not least, I’m just going to cover off some very quick questions that I’ve been asked, and how do I apply? So you need to speak to a finance or a mortgage broker. Feel free to speak to myself and I can certainly have a chat with you, just from a quick eligibility criteria checklist just to make sure you do qualify. And then we can look into your finances. Can I sell my house and buy another one and keep the guarantee? The short answer is no. If you sell your house and you buy another one, that second house does not qualify as your first home anymore. So when you sell it, you know, you won’t qualify for the for the scheme again. What happens if you need to sell your house? Well, you know, if, if you do need to sell it for whatever reason, basically what that means is that once you sell it, whatever you you profit out of it, you’ll get it. So if you’ve put the 5% in and you sell it at the purchase price, you get that 5% back and call it quits. So you can sell it but you certainly won’t qualify for the next scheme. What happens if you need to move out and rent it out? So short answer is you can’t qualify for that then that becomes an investment property. So unfortunately, what that means is you, you may then need to put more deposit in or pay the Lenders Mortgage Insurance fees because you’re you’ve converted that into a into an investment property.
Another question I get is how long does the first time deposit scheme guarantee remains in place for. So if you’re, if you’re getting into the scheme, the government will hold that 15% guarantee until such a time when you when you don’t need that. So obviously, if you pay your principal off, and you’ve got a 20% deposit and you know your LVR with a bank is only 80%, then the deposit scheme does not apply anymore, it just finishes off automatically. Will be charged for high interest rate under the first home loan deposit scheme? This is a very good question so far with all the 27 lenders that have to abide by the normal lending policy. And that what really that means is that they cannot charge you a higher rate. Just because you’re borrowing 95% LVR they can’t charge you the Lenders Mortgage Insurance so you will not be charged the fee. So if you’re getting 2% or 2.5%, whatever the the rate is that you’re getting for a normal loan at 80% LVR, you will get it for 95% LVR as well. Another question, what will the first home loan deposit scheme cost me? The good news is that it’s not going to cost you anything at all to get into the scheme. It is a guarantee from the government, but it is not a cash or rebate in any way, shape or form. It’s purely a guarantee from the government. Two main questions I’ve been getting as well can I use the guarantee to build my own home or purchase a house and land package? Absolutely you can. As long as you meet the eligibility criteria you can and can you actually use the FHLDS guarantee to make an off the plan purchase? Absolutely you can. So just be mindful of that. So yeah, I hope this has been informative for you. I just wanted to have a quick update on on the FHLDS scheme. If you have any questions at all that that’s specific, obviously I can’t cover every scenario and situation that you may have. But if you’re interested in having a conversation with either myself, Andrew or Mel or any one of our team members, I encourage you to go to our website Inspirerealty.com/getstarted, get started or just go to a website and go to the link get started. enter your details in then I’ll also send you a free guide on what you need to you know to qualify for to get the FHLDS so and and have a chat in a discussion with us as well if you want us to really look into more detail about whether you qualify for the scheme and potentially present you some options about some properties that are available for you under the scheme. So want to thank you so much for your time and I hope to see you again sometime soon. Have a great day and here is to building your better future together. Bye for now.
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