Your guide to the First Home Loan Deposit Scheme

The federal government introduced the First Home Loan Deposit Scheme (FHLDS) on 1 January 2020 to help buyers land their first home sooner. Lenders saw record breaking numbers of applications when it was introduced. But what makes it different to the other schemes currently available for first home buyers?

How does the First Home Loan Deposit Scheme work and why was it introduced?

The FHLDS helps first home buyers by providing a guarantor and reducing the amount needed for the deposit. In contrast to schemes such as the First Home Owner Grant offered by states and territories which can help reduce some of the upfront costs of buying a home, such as stamp duty.

Currently, there are only 10,000 FHLDS spots available per financial year. Successful applicants of the scheme will be able to purchase their first home with as little as a five per cent deposit.

They will have their loan guaranteed with a participating lender by the National Housing Finance and Investment Corporation (NHFIC), removing the need for Lenders Mortgage Insurance (LMI). The NHFIC provides this guarantee on the difference between the deposit amount and the 20 per cent threshold lenders need before requiring LMI.

Applying for the First Home Loan Deposit Scheme with the First Home Owners Grant

The FHLDS is separate to the First Home Owners Grant (FHOG). The FHOG is a national scheme managed by each state and territory government that discounts the payable stamp duty for first home buyers.

Each scheme aims to help first home buyers and you can apply for both in conjunction with each other.

Are you able to make the property an investment for a limited time?

There are several reasons why someone may make their home an investment property, such as moving for work, travelling overseas or simply buying a new home and wanting to rent out their current one.

If you move away for an extended period and rent out the home, your loan may no longer be guaranteed under the scheme. However, if the move is temporary and you don’t rent the home, you should still be guaranteed. We recommend having a discussion with your lender before any move.