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New year, new chance for first home buyers

New year, new chance for first home buyers

A new scheme from the federal government looks set to see thousands of new homeowners be given the keys to their first strata residence.

Designed to support eligible first home buyers purchase a home sooner, the First Home Loan Deposit Scheme is an initiative that offers eligible first home buyers, the chance to purchase a home with a deposit of as little as 5%.

With a one-off guarantee proved by The National Housing Finance and Investment Corporation (NHFIC) of up to 15% of the home’s value, this means eligible applicants will not need to take out lenders mortgage insurance nor rely on a family member or friends to act as guarantors.

The Scheme, which started on 1 January, will support up to 10,000 home loans each financial year through a panel of 27 participating lenders including two of the four big banks – NAB and Commonwealth Bank.

The remaining 25 non-major lenders – which include Bendigo Bank, Community First Credit Union and Indigenous Business Australia – have agreed not to charge eligible customers higher interest rates than equivalent customers outside the scheme.

They will begin offering guaranteed loans from February 1.

Housing Minister Michael Sukkar, also the government’s assistant treasurer, said having a rota of different financial institutions approved for the scheme will promote competition between the large and small banks, and ensure the scheme has broad geographic reach, including in regional and remote communities.

According to the NHFIC, eligible applicants must be Australian citizens who are at least 18 years of age, and must meet strict income threshold and property price restrictions.

Permanent residents and others buying together such as siblings, parent/child or friends are not eligible and only singles with a taxable income of up to $125,000 per annum and couples with a combined taxable income of up to $200,000 will have their application considered.

Likewise, applicants cannot not have previously owned or had an interest in a residential property, either separately or jointly with someone else, including residential strata and company title properties – regardless of whether it was an investment or owner-occupied property and whether it was ever lived in.

Maximum property purchase prices vary from postcode to postcode however owing to the fact that dwellings in large regional centres tend to be significantly more expensive than other region areas, capital city price caps will apply to large regional centres with a population over 250,000 including the Gold Coast, Newcastle, Lake Macquarie, the Sunshine Coast, Wollongong and Geelong.

Price caps in other regions vary from $250,000 in regional South Australia to $600,000 in Melbourne and $700,000 in Sydney.

The scheme only applies to owner-occupied home loans paid on a principal and interest basis, ruling out those seeking a property investment or interest only loan.

Once the scheme commences, applications will be lodged through participating lenders and their authorised representatives.

Potential strata homeowners can check their eligibility on the NHFIC website while the property price thresholds can be checked here.

Scheme highlights

* The scheme will support up to 10,000 loans each financial year, starting from 1 January 2020.
* The NHFIC will provide a guarantee that will allow eligible first home buyers on low and middle incomes to purchase a home with a deposit of just 5 per cent.
* Applicants must have a taxable income of no more than $125,000 per annum if single and couples a combined taxable income of no more than $200,000.

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