Understanding the First Home Loan Deposit Scheme

Understanding the First Home Loan Deposit Scheme

For many Australians, entering the property market and purchasing their first home is often challenging due to the large deposit required.

The Australian Government’s First Home Loan Deposit Scheme (FHLDS) is designed to assist eligible first home buyers purchase a home sooner by allowing them to obtain a loan with just a 5% deposit, rather than the standard 20% deposit.  The Government then guarantees the remaining 15%, which effectively enables buyers to avoid lenders mortgage insurance. The scheme commenced on January 1 2020 and already 3000 first-home buyers have reserved a place on the scheme.  There are only 10,000 loans available each financial year. The FHLDS can be used to purchase a new or existing property (and in some cases land), and can be used in conjunction with other government programs.

The significance of Lenders Mortgage Insurance when trying to buy your first home

Lenders Mortgage Insurance is an insurance premium typically paid on loan amounts greater than 80% of the value of the property.  It is a one-off payment, paid upfront by the borrowers to an insurer to protect the Lender for the higher risk loans. Under the FHLDS, the Government provides this protection to the lender, enabling borrowers to purchase a property without the need to save or pay for the insurance premium.  This amount can often be the difference between being able to purchase a home or not.  For example, borrowing 95% of a $500,000 home incurs a Lenders Mortgage insurance premium of approximately $20,000.

 Potential savings for first home buyers

The FHLDS, when combined with other Government and State-based incentives, may offer significant savings and help make buying your first home a reality. For example, the table below shows the potential savings when purchasing a new property with access to the First Home Owner Grant, full stamp duty exemption, and the lenders mortgage insurance waiver. Of course, be sure to speak with your lender or broker to understand your individual circumstances and eligibility.


Purchase Price

Standard Purchase costs      

New Purchase costs


































Whether you, a family member, or friend are considering your first home, it’s worthwhile investigating the eligibility requirements for the scheme.

Applying for the scheme

First home buyers who are considering purchasing under the FHLDS will need to apply for finance via one of the 27 lenders accredited to service the scheme.  Borrowers can still use their Mortgage Broker to support the application process however your broker will need to be approved for the scheme and meet the credit criteria of the lender.

If this is a topic that you would like to discuss in more detail, please go to www.MasterYourMoneyNow.com.au/getstarted to book in your complimentary 30 minute strategy session.
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Disclaimer: This information is general information only.  You should consider the appropriateness of this information with regards to your objectives, financial situation and needs. Past performance does not guarantee future returns.
Chris Carlin is an Authorised Representative (No. 1235031 for financial services and No. 514748 for credit) and Master Your Money Now Pty Ltd ABN 65 627 229 681 is a Corporate Authorised Representative (No. 1265677 for financial services and No. 514747 for credit) of Infocus Securities Australia Pty Ltd ABN 47 097 797 049 AFSL and Australian Credit Licence No. 236523
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