10 top tips to save for a home

Tuesday 09 Jul 2019

The newly elected Morrison Government will launch its new First Home Loan Deposit Scheme on 1 January 2020.

So, what does the new scheme mean for first home buyers (FHBs) and what sorts of rules might apply?

Currently, the Government is working on the detail of its policy so not everything is crystal clear at the moment.

What we do know is that the scheme will help FHBs purchase their first home will a deposit of just 5 per cent, instead of the normal 20 per cent.

The scheme is anticipated to save purchasers around $10,000 in Lenders Mortgage Insurance, which covers banks from purchasers who default on mortgage repayments, but not the purchasers themselves.

So, who’s eligible?

Singles on an income of up to $125,000 per annum and couples earning $200,000 will be eligible to apply, but there will be just 10,000 places per year.

The Government says the scheme will make the great Australian dream of home ownership a reality, while also protecting the value of homes for existing owners.

Given that it takes the average household nine or ten years to save a twenty percent deposit, the proposed scheme should shave many years off the period of time in which FHBs rent before buying a home.

How will it work?

The Government will offer $500 million in the form of equity using the National Housing Finance and Investment Corporation.

The value of homes that can be purchased under the Scheme will be determined on a regional basis, reflecting the different property markets across Australia.

Working in conjunction with the First Home Super Saver Scheme, the scheme will be available to eligible Australians that have saved a 5 percent deposit.

The Government then tops up the 15 percent difference between your 5 percent deposit and the full 20 percent that is required – effectively guaranteeing your loan.

It’s definitely not ‘free money’ but the Government’s guarantee will be permanent, unless a purchaser re-finances.

Lenders will still be required to conduct all the normal checks to make sure borrowers can afford their repayments. So in reality, you’ll still need to be able to service the full amount of money borrowed.

This means the scheme will bring forward purchases for those who have already nearly saved a 20 percent deposit, but are unlikely to make a big difference for those struggling to reach 5 percent.