New Year. New Home. New scheme.

*This article first appeared in the February 2020 Midland Express.

First-home buyers will need to move fast to benefit from a new federal government guarantee scheme.

The First Home Loan Deposit Scheme began on January 1 and allows first-home buyers to get a loan with a 5 percent deposit, rather than the standard 20 percent. The government will then guarantee the remaining 15 percent – effectively allowing buyers to avoid taking out lenders mortgage insurance.

But there is a catch. Just 10,000 loans will be approved each financial year.

It’s important to clarify the guarantee is not a cash payment to the first-time buyer. Rather, it’s like a promise from the government to the buyer’s home loan lender that if the buyer fails to repay their home loan, the government will pay the lender the guaranteed amount (15 percent balance based on a 5 percent deposit).

The guarantee of 10,000 loans each year to first home buyers is on a first-in, best-dressed basis, and only applies to owner-occupied loans with principal and interest repayments.

Applicants will be subject to eligibility criteria, including having taxable incomes up to $125,000 a year for singles and up to $200,000 a year for couples, as well as dwelling price thresholds.

The scheme – which also involves 25 non-major lenders whose guaranteed loans will be rolled out from 1 February. Only two of the big banks, NAB and Commonwealth are currently offering the loans.

All lenders have committed not to charge eligible customers higher interest rates than equivalent customers outside of the scheme, and many will be offering other incentives.

With applications coming in thick and fast, and the scheme being essentially a lottery it is advisable that if you are eligible and interested that you get on board as soon as possible.

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