Welcome to 2020! We hope that this is a great year for you and those you care about.

Normally, we would start a new year with something general about new year’s resolutions or how to save. But this year, we are jumping straight in. That’s because there is something we want you to know about ASAP.

As of the 1 January, the Commonwealth Government’s First Home Loan Deposit Scheme comes into effect. Announced in 2019, this scheme has already seen 3,000 registrations. In fact, demand has been so strong that the next batch of registrations cannot occur until 1 February.

The scheme is being rolled out by the National Housing Finance and Investment Corporation. In order to qualify, you need to be a first home buyer. You also need to have saved at least 5% of the deposit price for a home. You can either be a single person with an income of no more than $125,000 per year, or a member of a couple (married or de facto) with a combined income of no more than $200,000 a year. And you have to live in the property – the scheme is not available to investors. The scheme can be used for both existing and new housing.

The scheme works by having the recipient take up a bank loan to purchase a first home. The NHFIC will then guarantee an amount equal to up to 15% of the value of the home. The idea is that the recipient’s personal liability is capped at no more than 80% of value of the property. Usually, there is mortgage insurance to pay if you borrow more than 80% of the value of a property (this insures the lender, not the borrower. But the borrower pays the premium). This will still be the case – but the Government will pay this insurance for members of the scheme.

Being part of the scheme doesn’t mean that the recipient does not have to repay the whole loan! If you borrow, say, 95% of the value of the property, then you have to pay that whole loan back yourself: the Government is not paying off your loan for you. But by providing the guarantee and paying for the insurance, the Government is allowing people to obtain a loan faster than they otherwise might.

The value of the home is also capped. There are different caps for each state and different caps for cities with more than 250,000 residents as against non-city areas within each state.

The Government will guarantee up to 10,000 loans each financial year. The good news is that we are already halfway through the current financial year, meaning that there are 10,000 guarantees available between January 1 and June 30 2020. As we say above, there have already been 3,000 registrations this month – but most of that is pent-up demand from people who knew the scheme was coming. The rate of registration will slow down – but it still pays to move quickly if this scheme is something you want to consider. There are 7,000 spots left this financial year.

The scheme is a good one – but it may not be the best way to proceed in every case. So, if you or someone you care about thinks this scheme might be worth their while, please get in touch with us ASAP. We can help you examine whether you are eligible and whether this scheme best suits your needs – and then help you register for it too.