Saving up for a home loan minimum deposit is becoming increasingly difficult for many Australians, with the recent house price boom and increased deposit requirements making it tough for first-time buyers to infiltrate the market.
According to the First Home Buyer Report 2022 from Finder, saving up for a minimum home loan deposit has become 2-5 year exercise for some people, leaving many feeling deflated. The report also said that the average size of the minimum deposit on a house is currently at $119,560 which is 30% more than the average annual full-time salary of $90,916.
However, all is not lost for first home buyers, and that home ownership is still achievable if approached strategically and with a little help from the government. In this blog post, we’ll explore six first home buyer grants to help aspiring first home owners save up for a home loan minimum deposit faster.
Want to achieve your dream of homeownership sooner rather than later? Stay with us and keep reading.
What is the minimum deposit for a home loan?
Most lenders require a minimum deposit for home loan of 20% of the property’s value so that you do not pay the Lenders Mortgage Insurance. Lenders mortgage insurance NSW (LMI) is a type of insurance program that protects lenders from financial risk on home loans if the borrower defaults on their repayments.
Read more: Lenders Mortgage Insurance: Explained
Low Deposit Home Loans and No Deposit Home Loans
In general, lenders accept minimum deposit for home loan of 10% or even 5%, provided that you pay the LMI premium. They offer low deposit home loans that present borrowers with an opportunity to buy a property with as little as 5% deposit, provided that they meet the lender’s eligibility criteria.
Mortgages with low deposit like 5% deposit home loans come with higher interest rates than standard home loans. This is because lenders view these loans as higher risk due to the smaller deposit; they may charge higher interest rates to compensate for the increased risk.
No deposit home loans are very rare to come by, especially from traditional lenders. Most brokers would suggest that you look the other way because these types of loans come with harsher terms, one being that there is a higher threshold for minimum salary per annum ($150,000 up).
To buy a house with no deposit, you can take out a guarantor loan, use home equity, or get a non-refundable monetary gift to cover for your home loan minimum deposit.
6 First home buyer grants to help with your home loan minimum deposit
For first home buyers in NSW, there are various types of grants and schemes available depending on the location and purchase price of your new home. These grants are aimed at assisting eligible first home buyers to enter the property market as soon as possible.
1. Shared Equity Scheme NSW
The Shared Equity Scheme NSW, now called Shared Equity Home Buyer Helper, is a program run by the NSW Government to help eligible single parents, older singles (aged 50+), and key worker first home buyers purchase a home with as little as a 2% deposit.
The government’s contribution will be a percentage of the purchase price, up to a maximum of 40% for new homes and 30% for existing homes, and there will be no need to pay Lenders Mortgage Insurance. Participants will have the option of making voluntary payments to gradually increase their ownership stake in the property.
The program will receive up to 3,000 applications for two financial years, and applicants must meet certain eligibility criteria, including income and asset limits and purchase price limits. The participating lender for the program is Bendigo Bank.
2. First Home Buyer Super Saver Scheme
The First Home Super Saver Scheme (FHSSS) allows first-time home buyers to use up to $30,000 of their voluntary contributions from superannuation towards their home loan minimum deposit.
Eligibility requirements include being over 18 years old, not having owned property in Australia before, and not having withdrawn from the scheme before. Certain types of super contributions are not eligible for withdrawal.
Interested individuals must request a determination from the Australian Taxation Office (ATO) to determine the amount they can withdraw from their super.
3. Regional First Home Buyer Guarantee
The Regional First Home Buyer Guarantee program helps regional customers buy an owner-occupied home in designated regional areas.
To be eligible, applicants must be Australian citizens aged 18 years or over, earn no more than $125,000 (singles) or $200,000 (couples) in the last financial year, not have owned a home previously, have at least a 5% deposit (no need to pay LMI), purchase a property in their current or adjacent regional area, and have lived in a regional area or adjacent regional area for the preceding 12-month period.
4. First Home Guarantee (previously First Home Loan Deposit Scheme)
The First Home Guarantee allows first home buyers to present a home loan minimum deposit of 5%. The government guarantees the remaining 15%, meaning that the lender will not charge LMI.
The scheme has 35,000 places per year and is open to Australian citizens who are at least 18 years old, first home buyers, and intending to be owner-occupiers. The eligible property types include a newly built or existing house, apartment or townhouse, an off-the-plan apartment or townhouse, a house and land package, or land with a build contract to construct the home.
Note that there are property price caps for each state and territory. Go to this link to find out.
5. First Home Owners Grant
The First Home Owner Grant is a $10,000 grant for first home buyers in NSW who are buying or building a new home. You can use this amount for your home loan minimum deposit although it may not cover the full amount needed.
To be eligible, the home must be newly constructed or substantially renovated, and valued at no more than $600,000, or the combined value of land and building should be no more than $750,000.
The applicant must be an individual, a permanent resident or Australian citizen, 18 years or older, not have owned a residential property in Australia prior, and not have received a grant under the FHOG Act 2000 in any state or territory. The applicant must also live in the property for at least six continuous months and move in within 12 months from purchase.
6. First Home Buyer Assistance Scheme
The First Home Buyers Assistance Scheme (FHBAS) in NSW offers stamp duty exemptions or concessions for eligible individuals purchasing:
- a new home valued between $650,000 and $800,000,
- an existing home valued at less than $650,000,
- or a block of land valued at less than $400,000.
To be eligible, the individual must be a permanent resident or Australian citizen aged 18 years or older, not have owned a residential property in Australia previously, and not have received a grant under the FHOG Act 2000 in any state or territory.
If the individual is living in the purchased property, they must have lived in it for at least six continuous months and move in within 12 months from purchase.
Buy your first home with Stryve
The team at Stryve Finance can help you explore your options and find the grant that is right for you. If you are ready to take the first step towards buying your dream home, contact me and I will be more than happy to guide you through the process.
