The NHFIC announced NAB as the first major bank that will be offering home loans under the federal government’s First Home Loan Deposit Scheme.

The scheme allows first home buyers (FHB) to qualify for a home loan with a deposit as low as 5% and pay no Lenders Mortgage Insurance (LMI) fees.

The LMI savings for FHBs can be anywhere between $10,000 and $30,000 with this scheme.

Westpac cut from the scheme

Westpac who were set to be announced as the second major bank (from the big four) has been cut from the scheme in light of the recent money laundering allegations.

Two major banks will be allowed to write a maximum of 5,000 home loans out of the 10,000 available with the rest going to smaller lenders. This is being done in a bid to increase market competition.

That means, the second major lender contracted under the scheme will either be CBA or ANZ.

The lender will be announced shortly pending finalisation of contract negotiations, and additional lenders may be periodically added to the panel.

Good news for first home buyers!

There were talks of higher interest rates on these government-guaranteed mortgages.

Fortunately, lenders will not be able to charge a higher interest rate to eligible first home buyers under this scheme, that means if you are successful you will receive the same interest rates as equivalent mortgages outside of this scheme.

How to apply?

The first home buyer scheme is set to begin in January 2020.

You will only be able to apply for the first home buyers scheme through both accredited mortgage brokers and directly through the selected panel of lenders themselves.

NHFIC will not be accepting direct applications.

Applications for the scheme are not yet open.

Should you wait for the scheme to roll out?

We’re expecting a rush come January. So if you are likely to qualify for the scheme and are going to apply immediately when it becomes available, you should wait and apply then.

However, there were 110,000 first home buyers in 2018; this means that roughly 90% of first home buyers will likely miss out on the scheme as it is limited to 10,000 guarantees in the first year.

Besides, the government is yet to publish the full qualifying criteria for the scheme so you may later find out that you are not eligible.

Moreover, some property markets, such as Sydney and Melbourne, have shown signs of high growth in the last few months. Your property may not meet the price cap of the scheme.

In conclusion, if you are in a high growth market, it may be cheaper to pay LMI and buy now rather than to wait and risk paying a higher price for your home.

Low deposit home loans options

5% low deposit home loans have been available for quite some time now, albeit with mortgage insurance.

To find out if you qualify, speak with one of our award-winning specialist mortgage brokers by giving us a call on 1300 889 743 or by filling in our online assessment form today.