Buying your first property is always challenging, both financially and emotionally. Getting a home loan for your first home can be more daunting.
If you have a sufficient deposit as high as 20% of the property price, then you are well-equipped to go. But what if you do not have that much savings? Luckily, you can get first home buyer loans with as little as 5% of the purchase price of the property.
First Home Buyer Subsidies and Payments
The Australian government provides some initiatives to help first home buyers enter the property market. We will discuss these schemes and how you can take maximum advantage for your benefit.
First Home Guarantee (FHBG)
The First Home Guarantee (FHBG) is a replacement for the previous First Home Loan Deposit Scheme (FHLDS) and the New Home Guarantee (NHG). The new FHBG is administered by the National Housing Finance and Investment Corporation (NHFIC) on behalf of the Australian Government. FHBG is one part of the Home Guarantee Scheme, while the other one is Family Home Guarantee, which is designed for single parents purchasing a family home, regardless of whether that single parent is a first home buyer or a previous home owner.
The goal of the Scheme is to assist you in purchasing or building your first home by removing the Lenders Mortgage Insurance (LMI) fees, which is a fee applicable when you borrow more than 80% of the purchase price.
You must provide a minimum of 5% of the property value towards the deposit under this Scheme. Lenders require this deposit to be genuine savings (link), which is a deposit that you have saved yourself over time.
Generally, a home loan borrower will often need a 20% deposit to avoid incurring thousands in LMI costs. However, you can avoid LMI costs under the Scheme even with a 5% deposit since the government will guarantee the gap (up to 15%). The guarantee itself is not a cash payment or a deposit for a home loan.
This Scheme is not for all first-home buyers. There are certain eligibility requirements for applicants and for properties. There are 35,000 places available to eligible first home buyers from 1 July 2022 – 30 June 2023.
In addition, qualifying first-home buyers may be able to combine the Scheme with other government programs like the First Home Super Saver Scheme, state and territory First Home Owners Grants, and stamp duty discounts.
Are you eligible for FHBG?
There are several criteria for you to be eligible for the FHBG Scheme. The prominent ones are outlined below:
- A 5 per cent deposit is required as a minimum (most lenders require the deposit to have been accumulated through genuine savings (link)).
- Only Australian nationals over the age of 18 with a valid Medicare card are eligible. However, permanent residents are not eligible for this scheme.
- Single applicants earning up to $125,000 per annum and couples earning up to $200,000 per annum are eligible. The income from the year before to the year in which the loan is taken out will be considered. Notice of Assessment (issued by the Australian Taxation Office) for the previous year will need to be verified. The income doesn’t only refer to salary income, but to the final taxable income.
- Couples who are married or in a de-facto relationship are eligible for the Scheme. Other persons buying together, including siblings, parents and children, and friends are not eligible.
- Applicants must be first-time homebuyers who have never owned or had an interest in a residential property, either alone or jointly with another person. This is regardless of whether these properties were purchased as an investment or for personal use, and whether they were ever occupied.
- Applicants must intend to move into the property and live there as their primary residence (owner-occupiers). Investment properties are not supported.
- The value of the property must not exceed the price cap for the area in which the property is located. The price caps will vary between states and locations, such as cities, suburbs or regional centres.
In addition to the 5% deposit, first-time buyers must show proof of money to cover stamp duty, legal fees, bank fees, and other costs when the loan to value ratio exceeds 95% of the property value.
First Home Owners Grant
The First Home Owners Grant (FHOG) is a nationwide program funded by the Australian states and territories and operated under their own laws. Depending on your state and the property value, a one-time grant of $5,000 to $20,000 may be offered under this scheme.
It is noteworthy that you can use the grant as a deposit however, the funds will be advanced with your home loan only at settlement. If you are building a house, you will get the grant when you submit your first construction drawdown application.
Do First Home Buyers get all of these benefits?
It is a good initiative of the government that you can use the FHOG together with the deposit scheme. That means you can apply for the FHBG Scheme and still be eligible for the grant.
On top of that, state governments provide a variety of stamp duty exemptions, additional subsidies, and other perks to assist you in purchasing your first house. The deposit scheme and grant may encourage first-time buyers requiring assistance to purchase their own homes.
How to Apply for the First Home Guarantee Scheme?
The Scheme is administered by the National Housing Finance and Investment Corporation (NHFIC), which has contracted a panel of 27 lenders to implement this deposit scheme.
All New Home Guarantee applications must be made directly with one of the Scheme’s participating lenders. The NHFIC does not accept applications from first-time home buyers.
Lenders and mortgage brokers will examine scheme eligibility alongside other regular home loan factors, including serviceability, credit history and so on.
Mortgage Brokers can help you
Mortgage brokers can assist you to process your home loan application, deposit scheme, and grant as well.
It may be convenient to speak with your existing lender. But it is usually beneficial to look around. The mortgage industry is highly competitive, and you may be able to get a better rate if you shop around. Using the services of a mortgage broker is even better. They may be able to:
Explain the Costs and Process
Even if you qualify for the first-time homebuyer program, lenders will use their own lending standards to assess your home loan application. This is exactly where an experienced broker’s credit knowledge can be valuable.
A good mortgage broker can explain all the fees, costs and processes involved in buying a property and give you an accurate estimate of how much you can borrow.
Apply for Incentives
There are a range of government incentives available to first home buyers in Australia such as FHOG, and FHBG. A good mortgage broker will let you know about all such schemes and whether you are eligible for such grants or not. Also, they will assist you with all the paperwork and other legwork for the application process.
Help you get Approved
A good mortgage broker may be able to assist you in obtaining pre-approval so that you may confidently shop for your new home, knowing precisely what your maximum budget is. When you are ready to take the next step with your first home loan, your broker will help you arrange all the required documents and walk you through the loan process from start to settlement of the loan.
Support you all the way
A good mortgage broker has connections with a range of lenders and non-lenders and is familiar with their lending processes. It will save you time and money while also increasing your chances of acquiring a mortgage when you require one. They should also help you identify which house loan is best for you based on your situation and goals.
Finding the Right Mortgage Broker for you
A good mortgage broker will assess your financial situation and understand properly where you stand and what your ultimate goals and needs are. They will help you look at various mortgage options from their panel of lenders and find the right solution for your home loan requirements.
If you are looking for a mortgage broker, and are unsure of where to begin, you can go to our How to Find a Good Mortgage Broker page. Call us at AirBroker and find out how we can help you right the first time.
We will support you on how to find an appropriate loan product and, most importantly, secure your first house loan so you can hop onto the property ladder as quickly as possible.
Why Use Us?
At AirBroker, we take enough time to know you and your unique circumstance – it is a part of how we define ourselves as mortgage brokers providing a high quality service and personalised solution to our clients. It is what sets us apart from our competition.
We have a small team of professional brokers and are determined to provide the right home loan package for your needs. We understand financial circumstances are unique and that the home loan that helped your colleague save money may not be the right deal for you!
At AirBroker, we have several major lenders and non-lenders on our panel and can provide you with the right home loan option. We can obtain good deals and interest rates due to the relationships we have with them based on your application. We know which lenders can help you and which can not.
For most standard mortgage applications, we do not charge any fees for our services. We provide our services all over Australia and can deal with anyone buying or refinancing a property. Speak with one of the specialist mortgage brokers at AirBroker and find out how we can help you in your buying process.
Airbroker is a platform where people can compare brokers based on reviews and ratings. We are not a brokerage firm. We help people find appropriate mortgage brokers based on their requirements by comparing them on our website. You can search them on our website and contact them on your own.
