Professionals Real Estate 
What you need to know about the First Home Loan Deposit Scheme
First home buyers will get a leg up into the property market from next year thanks to the federal government’s new First Home Loan Deposit Scheme (FHLDS)
The scheme will come into effect from January 1 and allow 10,000 first home buyers each financial year the chance to secure a property with as little as a 5 per cent deposit.
Those taking advantage of the scheme will also be exempt from having to take out lenders mortgage insurance (LMI), which could be a saving of up to $10,000.
Who is the scheme open to?
The scheme is aimed at low and middle income earners buying their first property.
It will be available for singles with a taxable income of up to $125,000 per year, and couples with a combined income of less than $200,000 per year.
Applicants will also need to undergo the normal credit check process to ensure they can afford repayments and take out an owner-occupied loan on a principal and interest basis.
Are there price caps?
Support is being targeted at entry-level properties and as such there will be price caps, which will be dependent on the state the property is located in, as well as whether it’s within a capital city, a large regional centre, or in a regional area.
For example in Sydney, the nation’s most expensive market, property prices will cap out at $700,000, whereas it will be available for properties up to $450,000 for the rest of New South Wales.
At the lower end of the scale, just $250,000 will be available for properties purchased in South Australia, outside of Adelaide.
Further information on the property caps can be found at www.liberal.org.au/latest-news/2019/10/27/supporting-first-home-buyers.
Will the scheme affect other buyers?
As with any stimulus, it’s expected that the new scheme will help bolster property sales when it is introduced next year, making for fierce competition between buyers of all kinds.
Properties most affected will be those that come in under the cap levels, so expect properties just under the $700,000 range in Sydney to be popular come the start of next year.
The second wave of the scheme will be released in July, the start of the next financial year, so a further influx of new buyers is expected then.
However, there has been criticism that the 10,000 loans that will be supported by the scheme is an insignificant amount compared to the nearly 110,000 first home buyers across the country in the past 12 months, according to ABS figures.
Therefore we will have to wait and see whether the introduction of the scheme has any significant impact on the market.
