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First Home Loan Deposit Scheme

The First Home Loan Deposit Scheme allows some eligible first home buyers with a 5% deposit to get home loans without lenders mortgage insurance.

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The federal government's First Home Loan Deposit Scheme guarantees mortgages for first home buyers who have only saved a 5% deposit, effectively helping them buy sooner without paying lenders mortgage insurance premiums.

The First Home Loan Deposit Scheme came into effect on 1 January 2020.

Need help saving a house deposit? Check out our guide

The First Home Loan Deposit Scheme explained

  • If you've saved 5% of the purchase price of your property the government can guarantee the remaining 15% of the deposit.
  • Access to the scheme is limited to 10,000 borrowers, with a further 10,000 places open from July 2020.
  • You need to borrow the remaining 95%, but you can avoid LMI.
  • Your mortgage needs to be an owner-occupied loan with principal-and-interest repayments.
  • Eligible first home buyers can't be earning more than $125,000 a year ($200,000 combined for couples).
  • The value of eligible homes under the scheme varies by state and city/region (see property value caps below).

This scheme will make low deposit home loans cheaper and is administered through the National Housing Finance and Investment Corporation (NHFIC) in partnership with a range of lenders.

You can take a quick quiz on the NHFIC's website to see if you're eligible for the scheme.

What are the benefits of the scheme?

The scheme allows you to get a home loan sooner because you only have to save a smaller deposit. 5% deposit home loans already exist, but you need to pay LMI when borrowing more than 80% of a property's value.

With the first home loan deposit scheme you save time, because you can save a 5% deposit in a quarter of the time it would take to save 20%. You also avoid the LMI premiums, which can cost thousands of dollars (you can get LMI estimates using Genworth's LMI calculator).

But there is a downside. Saving a smaller deposit and borrowing more money means paying more interest over time. Let's break it down with the example of a $400,000 property and a 5% deposit versus a 20% deposit:

  • Property cost = $400,000
  • Deposit = $20,000 (5%)
  • Loan amount = $380,000
  • Interest rate = 4.00% over 30 years

In this scenario your costs are as follows:

  • LMI = $12,768
  • Monthly repayments = $1,814
  • Property cost = $400,000
  • Deposit = $80,000 (20%)
  • Loan amount = $320,000
  • Interest rate = 4.00% over 30 years

In this scenario your costs are as follows:

  • LMI = $0
  • Monthly repayments = $1,527

If you wanted to save a 20% deposit you'd need an extra $60,000 (but no LMI). This would equal around 33 months of mortgage repayments with a 5% deposit.

But with a 20% deposit your repayments would be noticeably cheaper, at $1,528 a month. That's $286 a month less.

Skipping the LMI means you buy the property faster and save $12,768 in LMI costs. But you'll pay $103,122 more in interest costs over 30 years with a 5% deposit.

But what if property values rise fast?

It's impossible to predict, but rising property prices could make the scheme more appealing. If your property rises in value while you're paying it off you're gaining equity (even while paying more interest).

And if you're still saving for that 20% deposit while prices keep rising, the amount of money you'll need to save will only continue to grow over time. You could get stuck.

Who is eligible?

Only Australian citizens are eligible (not permanent residents). You will need to be a first home buyer (if you own an investment property you won't be eligible) earning $125,000 ($200,000 for a couple) a year or less.

The scheme is limited to 10,000 borrowers for the first half of 2020, with another 10,000 places opening in July.

The scheme is open to a range of property types, including apartments, townhouses, house and land packages and existing houses. It is not limited to newly-built or off the plan purchases (unlike some first home owner grants).

Couples must be married or in de facto relationships. Friends or siblings cannot qualify for this scheme together.

Property value caps

To be eligible for the scheme you must be purchasing a property valued at or below the following thresholds:

State/TerritoryCapital city/regional centre*Rest of state
NSW$700,000$450,000
VIC$600,000$375,000
QLD$475,000$400,000
SA$400,000$250,000
WA$400,000$300,000
TAS$400,000$300,000
ACT$500,000$500,000
NT$375,000$375,000

*A regional centre is defined as a city with a population above 250,000, such as Newcastle, Wollongong or Geelong.

How do I apply for the First Home Loan Deposit Scheme?

You can apply directly with any lender participating in the scheme (see the full list of lenders below). You cannot apply for the scheme directly through the NHFIC.

The Commonwealth Bank and NAB accept applications from 1 January 2020 and smaller lenders take applications from 1 February 2020.

Which lenders are taking part in the scheme?

According to the NHFIC the following lenders will participate in the scheme:

Compare loans from lenders participating in the scheme

The loans in the table below are all for home buyers and are offered by lenders who are taking part in the first home loan deposit scheme. You can compare loans in the table below, submit enquiries with lender and brokers and learn more about specific products.

If a product has a "More info" button then it isn't available via Finder. However, you can contact the lender directly via their own website for more information.

Rates last updated April 4th, 2020
$
Loan purpose
Offset account
Loan type
Repayment type
Your filter criteria do not match any product
Name Product Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment Short Description
Gateway Bank Low Rate Essentials Variable Rate Home Loan - Special offer LVR up to 80% and over $500k (Owner Occupier, P&I)
2.76%
2.79%
$0
$0 p.a.
80%
A competitive, flexible variable rate mortgage for home buyers borrowing above $500,000. Eligible new home buyers with low deposits can apply for the First Home Loan Deposit Scheme with this lender and avoid LMI costs.
Auswide Bank Fixed Home Loan Plus with Freedom Package - 1 Year Fixed First Home Loan Deposit Scheme LVR<=95% (Owner Occupier, P&I)
2.99%
3.90%
$0
$395 p.a.
95%
UniBank Classic Home Loan - Owner Occupier
2.55%
3.04%
$600
$0 p.a.
80%
Auswide Bank Fixed Home Loan Plus with Freedom Package - 3 Year Fixed $100K+ FHLDS LVR <= 95% Special Offer (Owner Occupier, P&I)
2.47%
3.68%
$0
$395 p.a.
95%
Beyond Bank Total Home Loan Package - 3 Year Fixed Special (Owner Occupier, P&I)
2.79%
3.83%
$0
$395 p.a.
80%
A flexible 3 year fixed rate loan you can use to buy your own home.
Auswide Bank RBA Rate Tracker Home Loan - First Home Loan Deposit Scheme
2.74%
2.76%
$300
$0 p.a.
95%
A competitive rate that tracks the RBA official cash rate with no ongoing service fee.
Bank of us FlexiDiscount First Home Loan - 2 Year Fixed Deposit Scheme Rate Specials LVR >80% to <90%
2.99%
2.98%
$0
$0 p.a.
90%
Auswide Bank Fixed Home Loan Plus with Freedom Package - 3 Year Fixed First Home Loan Deposit Scheme LVR<=95% (Owner Occupier, P&I)
2.99%
3.81%
$0
$395 p.a.
95%
People's Choice Credit Union Basic Variable - New Business Special Offer $150k+ LVR <80% (Owner Occupier, P&I)
2.69%
2.69%
$0
$0 p.a.
80%
Bendigo Bank Live in Express Fixed Home Loan - 2 Year Fixed (Owner Occupier, P&I)
2.29%
2.96%
$250
$10 monthly ($120 p.a.)
80%
NAB Base Variable Rate Home Loan - Principal and Interest (limited time special offer for owner occupiers only, LVR >80%)
2.84%
2.84%
$0
$0 p.a.
80%
A home loan with no ongoing fee and a redraw facility that you can borrow up to 80% LVR.
Bank of Heritage Isle Goldrate Home Loan - LVR up to 80% (Owner Occupier, P&I)
2.79%
2.87%
$545
$0 p.a.
80%
Australian Military Bank Rate Saver Home Loan - 150K+ LVR 80% (Owner Occupier, P&I)
3.06%
3.07%
$500 (if over 80% LVR)
$0 p.a.
80%
A competitive variable mortgage for home buyers. This loan has flexible repayments and an optional redraw facility.
Bank Australia Basic Home Loan - Variable (Owner Occupier)
3.20%
3.24%
$595
$0 p.a.
80%
A competitive rate mortgage with limited extra features and low fees from a socially conscious, customer-owned bank.
Teachers Mutual Bank Solutions Plus Home Loan - $250,000 to $499,999 (LVR ≤ 60%, Owner Occupier)
3.02%
3.06%
$600
$300 p.a.
80%
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Will the First Home Loan Deposit Scheme really help?

This is a trickier question to answer and experts are split on the issue. Avoiding LMI and buying faster definitely removes an obstacle for first home buyers.

But LMI can be capitalised onto your loan, meaning you borrow it with your loan and pay it back over time. The people benefiting from the scheme are those who would probably be able to buy a property regardless.

Limiting the scheme to a capped number of borrowers further reduces its overall effectiveness. Consider that more than 8,000 first home buyers took out mortgages in March 2019 (according to the ABS).

There is a risk in borrowing 95% in a falling market

If property prices fall and you buy a home with a 5% deposit you risk ending up in negative equity. This is when your mortgage ends up being bigger than the value of the property.

Having negative equity makes it harder to sell your property or refinance. But if you keep paying off the loan principal and property prices rise you should be OK in the long run.

Are there other government schemes to help me buyers?

At the state and territory level most governments offer:

  • First home owner grants. This is a grant of money that can be used towards your purchase and is often reserved for first home buyers purchasing newly built properties.
  • Stamp duty concessions. Many governments waive or discount stamp duty for first home buyers, removing one of the bigger property costs.

Federally, there is another government scheme called the First Home Super Saver Scheme. This scheme allows you to make extra contributions to your super and then withdraw them to use for a home loan deposit, with tax minimisation benefits for doing so.

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Important Information*
Logo for UBank UHomeLoan Variable Rate - Discount offer for Owner Occupiers, P&I Borrowing over $200,000
UBank UHomeLoan Variable Rate - Discount offer for Owner Occupiers, P&I Borrowing over $200,000

Take advantage of a low-fee mortgage with a special interest rate of just 2.59% p.a. and a 2.59% p.a. comparison rate.

Logo for HSBC Home Value Loan - Promotional Offer (Owner Occupier P&I)
HSBC Home Value Loan - Promotional Offer (Owner Occupier P&I)

Get a low interest rate loan with no ongoing fees. Plus you can make extra repayments and free redraw online.

Logo for Suncorp Back to Basics Home Loan - Better Together Special Offer $150k+ LVR<=90% Incl. LMI (Owner Occupier, P&I)
Suncorp Back to Basics Home Loan - Better Together Special Offer $150k+ LVR<=90% Incl. LMI (Owner Occupier, P&I)

Get one free online redraw per month and pay no ongoing fees. Application fees are waived for loans above $150,000.

Logo for loans.com.au Essentials - Variable (Owner Occupier, P&I)
loans.com.au Essentials - Variable (Owner Occupier, P&I)

A competitive interest rate home loan with interest only options. Interest rate 2.79% p.a.
comp rate of 2.81% p.a.

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4 Responses

  1. Default Gravatar
    SteveOctober 21, 2019

    Does the 5% deposit have to be by way of genuine savings – saved over a minimum 3-6month period to be acceptable to the banks (normal) or does the govt. guarantee avoiding mortgage insurance negate that requirement.
    I see the great benefit in not paying a mortgage insurance premium but even saving 5% is difficult.
    thanks
    Steve

    • Avatarfinder Customer Care
      NikkiOctober 23, 2019Staff

      Hey Steve,

      Thanks for your comment. I understand your position and it is indeed a challenge to reach a 5% savings for a home loan. In general, the 5% deposit requirement for the First Home Loan Deposit Scheme will genuinely need to be savings. At the same time, this would depend on the specific requirements of the lender you choose.

      As a friendly reminder, carefully review the eligibility criteria of the loan before applying to increase your chances of approval. Read up on the terms and conditions and product disclosure statement and contact the bank should you need any clarifications about the policy.

      Hope this helps and feel free to reach out to us again for further assistance.

      Best,
      Nikki

  2. Default Gravatar
    EmilySeptember 14, 2019

    Hi,

    How do I apply for this?

    • Avatarfinder Customer Care
      JeniSeptember 14, 2019Staff

      Hi Emily,

      Thank you for getting in touch with Finder.

      Please get in touch with your state revenue office to know more on this first home loan deposit scheme. Further announcement/s will be provided before its launch date which will start on the 1st of January 2020.

      I hope this helps.

      Thank you and have a wonderful day!

      Cheers,
      Jeni

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