The First Home Loan Deposit Scheme explained | Finder

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.

On 6 October 2020 the First Home Loan Deposit Scheme added an extra 10,000 places for eligible home buyers for the 2020/21 financial year as part of the 2020 Budget. These extra places are for buyers purchasing newly-built properties or building new properties.

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 has expanded now from 10,000 to 20,000 borrowers in the current financial year.
  • 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 = 3.00% over 30 years

In this scenario your costs are as follows:

  • LMI = $12,768
  • Monthly repayments = $1,602
  • Property cost = $400,000
  • Deposit = $80,000 (20%)
  • Loan amount = $320,000
  • Interest rate = 3.00% over 30 years

In this scenario your costs are as follows:

  • LMI = $0
  • Monthly repayments = $1,349

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 $1,349 a month. That's $253 a month less.

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 for this scheme?

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 in a given financial year (although the government has now added an extra 10,000 places for purchases of newly-built homes).

The scheme is open to a range of property types, including apartments, townhouses, house and land packages and existing houses. The first 10,000 places are open to buyers of new or established properties.

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/Territory/regionPrice capPrice cap (new home)
NSW - capital city$700,000$950,000
NSW - regional centre$700,000$950,000
NSW - rest of state$450,000$600,000
VIC - capital city$600,000$850,000
VIC - Geelong$600,000$850,000
VIC- rest of state$375,000$550,000
QLD - capital city$475,000$650,000
QLD - regional centre$475,000$650,000
QLD - rest of state$400,000$500,000
WA - capital city$400,000$550,000
WA - rest of state$300,000$400,000
SA - capital city$400,000$550,000
SA - rest of state$250,000$400,000
TAS - capital city$400,000$550,000
TAS - rest of state$300,000$400,000
Jervis Bay and Norfolk Island$450,000$600,000
Christmas Island and Cocos Island$300,000$400,000

*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.

Eligible first home buyers can apply for one of the remaining First Home Loan Deposit Scheme (FHLDS) places through a participating lender before 30 June 2021.

On 1 July 2021, another 10,000 FHLDS places will be made available for the 2021-22 financial year.

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.

Data updated regularly
Name Product Interest Rate (p.a.) Comp. Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment
Auswide Bank Fixed Home Loan Plus with Freedom Package
$395 p.a.
UniBank Classic Home Loan
$0 p.a.
Beyond Bank Total Home Loan Package Fixed
$395 p.a.
A flexible 3 year fixed rate loan you can use to buy your own home.
Auswide Bank Basic Variable Home Loan
$0 p.a.
A competitive rate that tracks the RBA official cash rate with no ongoing service fee.
Auswide Bank Fixed Home Loan Plus with Freedom Package
$395 p.a.
People's Choice Credit Union Basic Variable
$0 p.a.
Bendigo Bank Live in Express Fixed Home Loan
$10 monthly ($120 p.a.)
Bank of Heritage Isle Goldrate Variable Home Loan
$0 p.a.
Australian Military Bank Rate Saver Home Loan
$500 (if over 80% LVR)
$0 p.a.
A competitive variable mortgage for home buyers. This loan has flexible repayments and an optional redraw facility.
Bank Australia Basic Variable Home Loan
$0 p.a.
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
$300 p.a.
Community First Basic Variable Home Loan
$0 p.a.
Borrow up to 95% LVR with no ongoing fee.

Compare up to 4 providers

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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4 Responses

    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.

      Default Gravatar
      NikkiOctober 23, 2019

      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.


    Default Gravatar
    EmilySeptember 14, 2019


    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!


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