Over the last couple of years, the Australian Government have made it a priority to help everyday Australians purchase a home to live in. It’s no secret that saving up for a house deposit is a challenging task. Let’s look at Melbourne (as an example).
With a median house price of $930,000, you would be required to save $186,000 if you were to pay a 20% deposit. Even a 10% deposit is just under $100,000. This is excluding any purchase costs such as stamp duty, transfer fees etc. For those in their 20’s or early 30’s, this can seem like a daunting figure to strive for.
Therefore, the Australian Government introduced the First Home Loan Deposit Scheme (FHLDS) to help first home buyers enter the property market with as a little as a 5% deposit (without the need to take out Lenders Mortgage Insurance):
· The Commonwealth Government guarantees the difference between what the eligible first home buyer has saved, and the 20% deposit threshold lenders usually require before they’ll provide a home loan without Lenders Mortgage Insurance
· For instance, if you have $45,000 to put towards a $500,000 home, the government will step in and guarantee the first $55,000 of your loan so that it brings your security up to $100,000 (Note, your loan would still be $455,000. The benefit comes from not having to pay LMI).
· You can use the FHLDS in conjunction with other government grants, schemes, concessions, and waivers. E.g. stamp duty concessions that you qualify for in your state or territory
· Borrowers are required to show evidence of ‘genuine saving’s to prove your ability to save and therefore repay your home loan
· Both newly built and established properties qualify for the scheme
What is ‘genuine savings’ and why is it important?
· Lenders want to see you’ve planned for and saved for a deposit yourself, as this shows that you’re likely to be a good borrower
· Lenders typically ask for a minimum of 5% of the purchase price, therefore the rest of your deposit can come from alternate sources.
· For example, if you were buying a $500,000 home, you’d need $25,000 in genuine savings as a deposit.
Can you use your ‘rental ledger’ as genuine savings?
· If you can prove a strong rental history, some lenders will make an exception to their normal genuine savings policy and may consider other deposit sources such as a gift from your parents
· For example, National Australia Bank are happy to classify your rental history repayments as genuine savings. If you have paid $500 a week in rent for the last year (equating to $26,000), they will classify this as ‘genuine savings’
· Therefore, the actual deposit for your home loan can come from other sources i.e. a gift, sales of an asset, tax refunds, employment bonuses, inheritance etc
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