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
NSW $600,000 $72,000 $22,000
VIC $600,000 $84,000 $23,000
QLD $475,000 $49,000 $11,000
WA $400,000 $45,000 $10,000
SA $400,000 $52,000 $25,000
TAS $400,000 $47,000 $25,000
ACT $500,000 $53,000 $35,000
NT $375,000 $48,200 $200


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.

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