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UPDATED: Calling all first home buyers! A must read guide to the First Home Loan Deposit Scheme

The Australian Government has launched a new initiative to support first home buyers on middle to low range incomes in purchasing their first home. This is called the First Home Loan Deposit Scheme and it provides first home buyers with the opportunity to purchase a home with as little as a 5% deposit and avoid paying Lenders Mortgage Insurance (LMI).

Launched on the 1st of January 2020, the FHLDS scheme will support up to 10,000 loan applications each year.

We've gathered the most popular questions related to the First Home Loan Deposit Scheme and have rounded up our experts answer your questions below.

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2021 update

The Federal Government has since announced changes to the First Home Loan Deposit Scheme, revealing that it plans to reissue unused guarantees from the first stage of the scheme.

What happened in 2020 was that the scheme proved to be very popular, with places in the scheme becoming exhausted within a few months of launching. However, for various reasons some first home buyers did not end up finalising their purchase meaning that approximately 2,000 guarantees were not settled.

Approximately 1,800 of these unused guarantees from the 2019-2020 financial year will now be reissued to allow for more first home buyers to enter the property market. This update, along with the low interest rates of 2021, is likely to be encouraging for first home buyers. First home buyer must apply for these remaining places through a participating lender before 30 June 2021.

Additionally, from 1 July 2021, a further 10,000 places in the scheme will be introduced for the 2021-2022 financial year.

What are the pros and cons to the First Home Loan Deposit Scheme?

Benefits:

  • Avoid paying LMI: The FHLDS can allow you to buy your home sooner and avoid paying Lenders Mortgage Insurance.
  • You won’t be charged a higher rate for having a low deposit: Participating lenders will not charge applicants a higher interest rate.
  • Available for a variety of properties: Unlike the First Home Owner’s Grant which only applies to newly built homes, the FHLDS can be used to purchase existing homes, an off-the-plan home, vacant land, or a house and land package.

Risks:

  • You’ll pay more in interest over the life of your loan: While taking out a loan with a smaller deposit will mean that you can buy a home sooner, it will also mean that you’ll pay more interest in total.
  • Limited numbers: The scheme will only support 10,000 first home buyers, so even if you are eligible, you might not qualify for the scheme.
  • Buying with a larger loan comes with risks: A higher Loan to Value Ratio (LVR) can mean it may be harder for you to refinance in future. It may limit the lenders that are available to you and you may miss out on more competitive rates.

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Can I qualify for both the First Home Owner Grant, and the First Home Loan Deposit Scheme?

Yes, you can. The FHLDS can be combined with other state and territory based home buying assistance programs such as the First Home Owner Grant (FHOG). This means that as well as buying a home with a lower deposit, you may be able to avoid paying all or a part of your stamp duty tax.

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Who is eligible for the First Home Loan Deposit Scheme (FHLDS)?

  • Australian citizens (must be at least 18 years of age, permanent residents are not eligible)
  • Couples will only qualify for the scheme if they are married or in a defacto relationship. Other persons buying together i.e. siblings, parent/child or friends are not eligible
  • Applicants must have a deposit of between 5% - 20% of the property value
  • Scheduled repayments of the principal loan amount are required under the scheme for the full period of the agreement
  • If the loan relates both to the purchase of vacant land and the construction of a house on the land, the loan may be an eligible loan even if the terms of the loan agreement permit interest-only repayments for a specified period
  • Applicants must intend to move into the property and use the property as their principal place of residence. The property must be for owner-occupied use only, not an investment
  • Applicants must be first home owners who have not owned another property previously (jointly or separately) regardless if it was owner-occupied or investment property, and regardless of whether the property was actually lived in

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What income brackets are eligible for the First Home Loan Deposit Scheme (FHLDS)?

  • Singles: taxable income of up to $125,000 per annum
  • Couples: taxable income of up to $200,000 per annum
  • Note that incomes will be assessed for the financial year preceding the financial year in which the loan is approved

What type of property can be purchased in the First Home Loan Deposit Scheme (FHLDS)?

  • An existing property (house, townhouse or apartment)
  • A house and land package
  • Vacant land with a separate building contract to construct the home
  • An off-the-plan purchase (apartment or townhouse)

What are the property price limits for the First Home Loan Deposit Scheme?:

Recognising that dwellings in regional centres tend to be significantly more expensive than other regional areas, the capital city price thresholds for the FHLDS also apply to regional centres with a population over 250,000 (the Gold Coast, Newcastle and Lake Macquarie, the Sunshine Coast, Illawarra (Wollongong) and Geelong).

State/territoryCapital city and regional centresRest of state/territoryOther
NSW$700,000$450,000
VIC$600,000$375,000
QLD$475,000$400,000
WA$400,000$300,000
SA$400,000$250,000
TAS$400,000$300,000
ACT$500,000-
NT$375,000-
Jervis Bay Territory and Norfolk Island--$450,000
Christmas Island and Cocos (Keeling) Islands--$300,000

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How do applicants apply to the First Home Loan Deposit Scheme?

Applications can be lodged through participating lenders, with help from a Lendi Home Loan Specialist. You can see if you qualify by clicking here and choosing a time to chat with an expert.

What lenders are participating in the FHLDS?

  • Australian Military Bank
  • Auswide Bank
  • Bank Australia
  • Bank First
  • Bank of us
  • Bendigo Bank
  • Beyond Bank Australia
  • Community First Credit Union
  • CUA
  • Defence Bank
  • Gateway Bank
  • G&C Mutual Bank
  • Indigenous Business Australia
  • Mortgageport
  • MyState Bank
  • People’s Choice Credit Union
  • Police Bank (including the Border Bank and Bank of Heritage Isle)
  • P&N Bank
  • QBANK
  • Queensland Country Credit Union
  • Regional Australia Bank
  • Sydney Mutual Bank and Endeavour Mutual Bank (divisions of Australian Mutual Bank)
  • Teachers Mutual Bank Ltd (including Firefighters Mutual Bank, Health Professionals Bank, Teachers Mutual Bank and UniBank)
  • The Mutual Bank
  • WAW Credit Union

So there you have it, the First Home Loan Deposit Scheme explained. If you have any home loan questions or want to see if you are eligible for the FHLDS, then jump on the Lendi platform or chat to a Home Loan Specialist here.

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The information in this post is general in nature and should not be considered personal or financial advice. You should always seek professional advice or assistance before making any financial decisions.

Tags: saving, interest rate, new purchase, first home buyer, first home owners grant, first home, first property

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# Quoted rate applies only to PAYG loans with LVR of 80% or less with security in non-remote areas. All applications are subject to assessment and lender approval.
Lendi is a privately owned and operated Australian business. Our mission is to change the way Australians get home loans by providing a faster, smarter and more secure home loan experience designed around the customer’s convenience and needs. Although Lendi compares over 1600 products (2,500+ products including feature and pricing variations) from more than 35 lenders, we don't cover the whole market or compare all features and there may be other features or options available to you. While Lendi is 35% owned by founders and employees, we have also been supported by some great minority shareholders including Bailador, Macquarie Bank Ltd and a number of Australian sophisticated investors. Lendi's board is majority independent and non-executive.
WARNING: This comparison rate is true only for the example given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. The comparison rates are based on a loan amount of $150,000 over a loan term of 25 years. Fees and charges apply. All applications are subject to assessment and lender approval. Quoted rate applies only to PAYG loans with LVR of 80% or less with security in non-remote areas. All applications are subject to assessment and lender approval.
IMPORTANT INFORMATION: Loan terms of between 1 Year and 40 Years are available subject to lender and credit criteria. Maximum comparison rate will not exceed 14.99% (see comparison rate warning above). Any calculations or estimated savings do not constitute an offer of credit or a credit quote and are only an estimate of what you may be able to achieve based on the accuracy of the information provided. It doesn't take into account any product features or any applicable fees. Our lending criteria and the basis upon which we assess what you can afford may change at any time without notice. Savings shown are based on user inputted data and a loan term of 30 years. All applications for credit are subject to lender credit approval criteria.
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