In reality, buying your first home in Adelaide is overwhelming. Calculating upfront costs, understanding how much you can borrow, keeping up to date with the latest government grants, deciding whether to buy existing vs new and researching the property market are all part of the journey that first home buyers navigate.
Among all these factors, saving for the house deposit is the first step and a challenge for many Aussies.
The good news is that the Australian Government launched a new initiative to encourage first home buyers to purchase their first home.
Let’s take a detailed look at this new initiative and analyse all possible pros and cons for better decision making.
What Is First Home Loan Deposit Scheme (FHLDS)?ere
It allows first home buyers to buy a home with as little as a 5 per cent deposit and avoid paying LMI (Lender’s Mortgage Insurance). This scheme initially launched on January 1st, 2020 and will support up to 10,000 loan applications each year. (Source: nhfic.gov.au)
2021 Update: FHLDS (New Homes) Extended For 2021-22
It will include an additional 10,000 FHLDS (New Homes) in the scheme from July 1st, 2021, to June 30th, 2022. (Source: nhfic.gov.au)
Assessing The Pros And Cons Of First Home Loan Deposit Scheme (FHLDS)
Open for a variety of properties: Unlike First Homeowner’s Grant, which is only applicable to newly built homes, the FHLDS can be used to buy existing homes, vacant land, an off-the-plan home, or a house and land package.
Avoid higher rates for low deposit: Participating lending institutions will not charge borrowers with a higher interest rate.
No LMI: The FHLDS enable you to buy your own home sooner and avoid paying LMI (Lender’s Mortgage Insurance).
Purchasing a house with a larger loan comes with certain risks: You can experience a higher Loan To Value (LVR) ratio, which may cause issues with refinancing in future. You may miss out on competitive interest rates as it will limit lenders available to you.
Limited applications: The scheme will only support ten thousand first home buyers. It means that even if you are eligible, you may not qualify for the scheme.
You will pay more interest: While taking a home loan with a smaller deposit will help you buy a home sooner. It will also imply that you will pay more interest over the life of your mortgage.
Work Out What Is Essential To You!
It is easy to fall in love with the house you are renting or suburb you are currently living in. However, doing some thorough research about house styles you like, locations you prefer, and prices you can afford will ensure you come up with the best decision.
Accessibility to grants and schemes certainly makes it easy for many Aussies to buy their first home sooner. However, every individual is different, so their circumstances mean there is no one-size-fits-all for FHLDS.