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The [First Home Loan Deposit Scheme (FHLDS)](https://www.nhfic.gov.au/what-we-do/fhlds/) has seen a number of changes in recent months. The scheme was launched 1 January 2020 with the aim of assisting low and middle income first home buyers purchase their first home with a low deposit and not face [Lenders Mortgage Insurance (LMI)](https://www.lendi.com.au/guides/lmi/) charges. 

Here we’ll explain the updates to the scheme and how these changes could benefit you. We’ll also take a look at the [Family Home Guarantee](https://www.lendi.com.au/inspire/finance/family-home-guarantee/) which was announced in the [2021 budget](https://www.lendi.com.au/inspire/finance/how-the-2021-budget-will-affect-property-buyers/). Head to our [original article](https://www.lendi.com.au/inspire/finance/explained-the-first-home-loan-deposit-scheme/) on the FHLDS for an overview of the initial scheme.

The First Home Loan Deposit Scheme is an initiative designed to help first home buyers purchase or build their first home. Typically, lenders recommend having a deposit of at least 20% of the purchase price to avoid being charged [Lenders Mortgage Insurance (LMI)](https://www.lendi.com.au/guides/lmi/). 

With the FHLDS, eligible first home buyers can build a new home or purchase a new or existing home with a deposit as low as 5% and not be charged LMI. Under the scheme, the National Housing Finance and Investment Corporation guarantees the lender up to 15% of the property purchase price. 

## 2021 updates to the First Home Loan Deposit Scheme

### 1. Unused guarantees reissued

In February, the federal government revealed plans to reissue unused guarantees from the first stage of the scheme. The scheme was very popular in 2020, with places being taken up within months of launching. However, some buyers did not end up finalising their purchase resulting in roughly 2,000 guarantees being left unsettled.

Approximately 1,800 of these unused guarantees from the 2019-2020 financial year have been reissued, allowing more first home buyers entry to the property market. Applications through a [participating lender](https://www.nhfic.gov.au/what-we-do/fhlds/how-to-apply/#FHLDSLENDERS) close for these remaining places on 30 June 2021.

### 2. 10,000 extra places in the scheme introduced

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

### 3. Eligible property price cap increased

In June, the government announced that property price caps will increase for homes purchased under the First Home Loan Deposit Scheme, as well as the Family Home Guarantee. This will provide first home buyers with greater access to the property market.

In most locations, price cap limits will rise by at least $50,000, with the ACT being the only state/territory to retain its current price cap of $500,000 for the upcoming financial year.

Here are the updated price caps under the First Home Loan Deposit Scheme and the Family Home Guarantee, commencing 1 July 2021:

|      | Capital city     | Rest of state/territory     |
| ---------- | ---------- | ---------- |
| NSW       | $800,000       | $600,000       |
| VIC       | $700,000       | $500,000       |
| QLD       | $600,000       | $450,000       |
| WA       | $500,000       | $400,000       |
| SA       | $500,000       | $350,000       |
| TAS       | $500,000       | $400,000       |
| ACT       | $500,000       | -       |
| NT       | $500,000       | -       |

## How does the First Home Loan Deposit Scheme work?

To avoid buyers being charged LMI for having a deposit under 20%, the National Housing Finance and Investment Corporation guarantees the lender up to 15% of the property purchase price. LMI can be more costly than many buyers imagine, so avoiding it while getting faster access to the property market can be a real win. 

[Click here](https://www.lendi.com.au/inspire/finance/explained-the-first-home-loan-deposit-scheme/) to learn more about how the process works.

%%Will you need to pay LMI?%%

## Who is eligible for the First Home Loan Deposit Scheme?

There are several eligibility requirements that applicants must meet in order to be eligible for the FHLDS. These include:

- Being an Australian citizen aged 18 or above. Permanent residents are not eligible
- Couples qualify if they are married of in a de facto relationship
- Applicants must have a deposit of between 5% - 20% of the property value. At least 5% must be made up of [genuine savings](https://www.lendi.com.au/inspire/finance/home-loan-application-what-is-the-difference-between-genuine-and-non-genuine-savings/)
- 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

There are also income caps in place. If you are a single applicant, you are only eligible for the scheme if you have a maximum taxable income of $125,000 per annum. For couples, their combined taxable income cannot exceed $200,000. 

## What is the Family Home Guarantee?

The [Family Home Guarantee](https://www.lendi.com.au/inspire/finance/family-home-guarantee/) is a measure that was introduced in the 2021-2022 federal budget. It helps eligible single parents with dependents build or purchase a home with a deposit as little as 2%. The applicant will still be assessed on their ability to service a home loan.

10,000 Family Home Guarantees will be on offer over four financial years, beginning from 1 July 2021. Unlike other schemes, the Family Home Guarantee isn’t just available to first home buyers. You can still be eligible, even if you’ve previously owned property. 

The basic eligibility criteria is:

- Applicants must be Australian citizens aged 18 and above
- Applicants must be single parents with dependents 
- Maximum annual taxable income of $125,000

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## Pros and cons of the First Home Loan Deposit Scheme

| Pros     | Cons     |
| ---------- | ---------- |
| Avoid paying LMI and potentially save thousands       | You could spend more time paying off your loan and will likely pay more in interest over the loan term       |
| Applies to a range of property types, not just newly built homes       | Limited places in the scheme       |
| Participating lenders won’t charge a higher interest rate for having a low deposit       | Having a larger loan with a higher [Loan to Value Ratio (LVR)](https://www.lendi.com.au/home-loans/lvr/) can make refinancing more difficult in the future       |
| The FHLDS can be combined with other first home buyer assistance programs such as the [First Home Owner Grant](https://www.lendi.com.au/guides/first-home-owner-grant/) or the [First Home Super Saver Scheme](https://www.lendi.com.au/inspire/finance/first-home-buyer-super-saver-scheme/)       | You generally can’t tap into your equity until you have at least 80% LVR.       |
| Single parents have access to a similar scheme, the Family Home Guarantee, even if they’ve previously owned property.       | -       |

If you’re interested in applying for the FHLDS or the Family Home Guarantee, get in touch with a [Home Loan Specialist](https://www.lendi.com.au/book-appointment/) for free expert advice.

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## Got a home loan question? Just ask!
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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.*

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