First Home Buyer Mortgages Australia

How To Get An Affordable Mortgage In Australia

Buying residential property for the first time is never easy as there are many challenges, especially for first time home buyers. The first challenge is finding the perfect property for your needs. After all, there are many homes for sale in every city and suburb. Secondly, there are many lenders in the industry and they offer different types of mortgage products. Comparing those lenders as well as the products they offer is not easy. First time home buyers may also not have the deposit needed to secure affordable home loans. Fortunately, in 2020, there is the first home buyer loan deposit scheme, which makes it easier for first-time home buyers to secure affordable mortgages.

The First Home Loan Deposit Scheme or FHLDS

This is a government-sponsored program aimed at helping first-time home buyers raise the minimum deposit of 20% required by lenders. This is the minimum deposit needed to avoid paying the lenders mortgage insurance, or LSI. While lenders accept deposits as low as 5%, they often require the applicant to pay the LSI to limit their risk exposure. Applicants with a 20% deposit do not need to pay the LSI to qualify for a home loan. With the first home buyer scheme, borrowers who have raised at least 5% deposit get financed by the government to attain the 20% minimum deposit required by lenders.

Through this mortgage program, borrowers can save more than $10,000 in LSI fees. From 1st January, 2020, the program will be supporting 10,000 first-time home buyers in Australia. From 1st February, 2020, around 25 non-bank lenders will be offering government-guaranteed loans under the FHLDS.

Eligibility Requirements

1. Australian Citizenship

Only Australian citizens who have attained the age of 18 years can apply for the FHLDS. Permanent residents do not quality. In case you want to apply as a couple, both you and your spouse must be Australian citizens. This is because the program has been created specifically to help Australians to qualify for cheap home loans.

2. Income Limits

To qualify for this program, the applicant must have earned not more than $125,000. If applying as a couple, the applicants must have earned less than $200,000 in the previous year. If you earned more than this in the previous year, you will not be eligible for the FHLDS.

3. Deposit

To qualify for this deposit assistance program, the applicant must have saved at least 5% of the value of the home. However, the deposit saved must not have exceeded 20%. If the value of the home you want to purchase is $600,000, you must have at least $30,000 savings in your bank account. However, the savings must not exceed $120,000.

4. No Prior Home Ownership

The first home buyer scheme, as the name suggests, is meant for Australian citizens who are acquiring their first home. If you have ever owned a home in the past, you will not qualify for the program. You must have also not owned any type of property through a company. Before your application can be approved, a background check will be done to confirm that you have never owned property previously.

5. Buying Price

Only certain properties qualify for the program. The average property prices for the location must be considered when assessing a property. The buying price must not be above the average for that location. Additionally, the purchase must be financed by a participating financial institution.

6. Owner-Occupier Requirement

The first home buyer scheme is meant to help aspiring homeowners to buy their first home. Applicants wishing to acquire commercial property or residential property to rent out to third parties cannot qualify. Therefore, applicants must move into the house in question within 6 months. The applicant must also be willing to live in the house for the entire period when the home loan is under the guarantee of the FHLDS.