First Home Loan Deposit Scheme (FHLDS)- Supporting first home buyers
The First Home Loan Deposit Scheme is a Australian Government initiative to support eligible first home buyers purchase a home sooner.
It does this by providing a guarantee that will allow eligible first home buyers on low and middle incomes to purchase a home with a deposit of as little as 5 per cent.
The Scheme will support up to 10,000 loans each financial year, starting from 1 January 2020.
1. ARE YOU AN ELIGIBLE FIRST HOME BUYER
The Scheme is open to singles or couples.
If you are looking to purchase your first home as the only person named as a borrower in your home loan, then you would apply under the Scheme as a single.
If you are looking to purchase your first home with your spouse or de facto partner, where you are both named as borrowers in your home loan, then you would both apply under the Scheme as a couple.
Arrangements with other people that do not qualify If you are intending to be named as a borrower in your home loan with someone else who is not also your spouse or de facto partner, and whether that is under a home loan that: • only has 2 borrowers, or • has 3 or more borrowers, even if one of the other borrowers is also your spouse or de facto partner, then that home loan will not be eligible for the Scheme.
For example, a loan arrangement with a relative – such as with a sibling – will not be eligible for the Scheme.
Your eligibility checks
There are several criteria used to determine eligibility under the scheme. You should consider whether your personal circumstances satisfy all of the following checks. They relate to your eligibility as a first home buyer who is able to have the benefit of the Scheme.
The key checks for your personal circumstances are:
an income test
a prior property ownership test
a minimum age test
a deposit requirement, and
an owner-occupier requirement.
If you do not satisfy any of these checks – which are described below – you should not ask your lender to make any submissions or applications to the Scheme. If you are unsure of any of these matters, you should ask your lender and/or seek appropriate advice.
Which properties are eligible for the Scheme
For a property to be eligible for the scheme it must:
• be a ‘residential property’ – this term has a particular meaning under the Scheme, and you should ask your lender if there is any doubt.
• have a purchase price under the price cap for its location
• be purchased by an eligible first home buyer under the scheme.
• at the settlement date for your home loan, you will be the sole registered owner/s of the property.
• be a property which is (1) an established dwelling, or (2) a new-build dwelling that is purchased under a house and land package, a land and separate contract to build a home or an ‘off-the-plan’ arrangement that is financed under an Eligible Loan from a participating lender.
The relevant dates and requirements for the different property types are set out in the table below.
Contract and settlement dates
To be eligible for the Scheme: • You must enter into your home loan on or after 1 January 2020 • the settlement date for your home loan must be on or after 1 January 2020, and • the contract of sale and/or eligible building contracts may have specific requirements in terms of when they may be signed by you (as described in the relevant sections below).
There are no exceptions from these required dates.
Purchase of existing dwelling
Where you are purchasing an existing dwelling: • you must move into the property within 6 months of settlement of your home loan, and • the property must be purchased under a contract of sale that you sign on or after 1 January 2020.
This category does not include ‘off-the-plan’ purchases, which are described below.
House and land package
For house and land packages, prior to the settlement date for your home you will need to have entered into: • a contract of sale for the land; and • an eligible building contract to build your dwelling on that land (either as part of the contract of sale for the acquisition of the land or as a separate stand-alone contract),
where both contracts are with the same person (or with 2 members of a corporate group) and they can have been signed by you at any time (including where you have signed them before 1 January 2020).
Land and separate contract to build a home
Where you are acquiring land with a separate contract to build a home, prior to the settlement date for your home loan you must have: • acquired the land under a contract of sale, and • entered into an eligible building contract to build your dwelling on that land.
In a land and separate contract to build scenario, these contracts are entered into with different persons and both must be signed on or after 1 January 2020.
Where you are making an ‘off-the-plan’ purchase: • you must have entered into the contract of sale before the settlement date for your home loan, and • the settlement date for your home loan must occur within 90 days that your home loan becomes guaranteed under the Scheme.
Eligible building contracts
To be an eligible building contract under the Scheme, your building contract must: • be with a licensed or registered builder • specify a contract sum for all costs in respect of the construction of the dwelling, and • require the builder to (1) commence construction within 26 weeks of the settlement date for your home loan, and (2) complete construction and procure the issuance of an occupancy certificate within 24 months of the settlement date for your home loan.
‘Owner builder’ contracts are not eligible building contracts for the Scheme.
Which home loans are eligible for the Scheme?
Not all home loans are able to take the benefit of the Scheme.
The Scheme is restricted to ‘Eligible Loans’, which are home loans: • made by a Participating Lender to (1) a single eligible first home buyer, or (2) a couple who are both eligible home buyers, and • that are for the purchase of an Eligible Property that is to be occupied by you as the owner
In addition to these overarching eligibility requirements, the loans must:
• be secured by a registered first ranking mortgage over the eligible property
• have no other registered owners at the time of settlement other than the eligible borrower/s
• have 100% of the loan drawdown proceeds used for the purchase (or towards the purchase and improvement) or construction of the eligible property
• have a loan amount commitment not less than 80% and not more than 95% of the relevant Value of the property
• have a loan term of 30 years or less
• require regular principal and interest loan repayments.
Exception to this will be granted during the construction of a new dwelling, whereby lenders will be able to allow borrowers to make interest only repayments for the period in which the dwelling is being constructed until it can be occupied by the borrower.
• allow for no changes to loan terms, such as increased limit
The loan may comprise more than one tranche, for example fixed and variable loan tranches.
If you are intending to construct a dwelling on vacant land, your home loan must finance both the acquisition of the land and construction of a dwelling. If you are intending to purchase land where a dwelling is not affixed and you are not also using your home loan to construct a dwelling, this your home loan is not eligible for the Scheme. You will need to contact your lender to clarify whether your home loan finances both the acquisition of land and construction of a dwelling.
2. PROPERTY PRICE THRESHOLDS
To ensure the Scheme is only available for the purchase of a modest home, or the purchase of land and construction of a modest home, the following property price thresholds (maximum property purchase price under the Scheme) will apply in capital cities, large regional centres and regional areas:
NSW - capital city $700,000
NSW - regional centre (Newcastle and Lake Macquarie) $700,000
NSW – regional centre (Illawarra) $700,000
NSW – other $450,000
VIC – capital city $600,000
VIC – regional centre (Geelong) $600,000
VIC – other $375,000
QLD – capital city $475,000
QLD – regional centre (Gold Coast) $475,000
QLD – regional centre (Sunshine Coast) $475,000
QLD – other $400,000
WA – capital city $400,000
WA – other $300,000
SA – capital city $400,000
SA – other $250,000
TAS – capital city $400,000
TAS – other $300,000
Northern Territory $375,000
Jervis Bay Territory & Norfolk Island $450,000
Christmas Island & Cocos (Keeling) Island $300,000
The capital city price caps will apply to large regional centres with a population over 250,000 (the Gold Coast, Newcastle and Lake Macquarie, the Sunshine Coast, Illawarra (Wollongong) and Geelong), recognising that dwellings in large regional centres tend to be significantly more expensive than other regional areas.
3. HOW TO APPLY
The First Home Loan Deposit Scheme will start on 1 January 2020. Applications for the Scheme are not yet open.
Once the Scheme commences, applications will be lodged through participating lenders and their authorised representatives.
NHFIC will not accept applications directly and is not able to provide personal financial advice. First home buyers (and those advising a first home buyer) are encouraged to consult with a participating lender and seek their own independent financial and legal advice on how to structure their loan arrangements in a way that suits their own personal circumstances.
Following a competitive procurement process, NHFIC has appointed 27 lenders on the panel of residential mortgage lenders to offer guarantees under the Scheme.
The 25 non-major lenders will begin offering guaranteed loans from 1 February.
All participating lenders are supporting the Scheme by not charging eligible customers higher interest rates than equivalent customers outside the Scheme.
2019 Copyright of National Housing Finance and Investment Corporation (NHFIC).