What is the FHLDS (New Homes)?

The First Home Loan Deposit Scheme (New Homes) is a federal government scheme to help first home buyers purchase or build a new home with a smaller deposit without needing to pay Lenders Mortgage Insurance (LMI). It is also known as the FHLDS New Home Guarantee.

Traditionally, you’d require a deposit of 20% of the property value to avoid paying LMI. WIth the FHLDS Scheme, you only need a 5% deposit plus purchasing cost. This Scheme can potentially save first home buyers with a low deposit (lower than 20%) tens of thousands of dollars in LMI fees.

First home buyers can also use this Scheme along with other state and federal grants such as the HomeBuilder grant and get stamp duty concessions/exemptions on their purchase.

The federal government announced this scheme as part of its 2020-2021 budget announcement adding an additional 10,000 places on top of the existing FHLDS scheme.

What are some key features of the FHLDS (New Homes)?

Here’s a quick snapshot of the key features of the FHLDS (New Homes). The Scheme:

  • provides an additional 10,000 places for new homes only
  • places are only available until 30 June 2021
  • has a higher property price caps
  • provides more support for off the plan property purchases
  • has shorter contract, start and finish build times to assist with stimulating the residential construction sector.

The Scheme is administered by the National Housing Finance and Investment Corporation (NHFIC).


What properties are eligible for the FHLDS (New Homes)?

Eligible properties under the FHLDS (New Homes) include:

It’s worth noting that some of the participating lenders, like the Teachers Mutual Bank, are not accepting applications for off-the-plan dwellings.

In addition, the standard lending policy of the participating lenders applies. Please see below.

Price cap for new homes under the FHLDS (New Homes)

State/Territory Capital Cities and Regional Centres Rest of State
New South Wales (NSW) $950,000 $600,000
Victoria (VIC) $850,000 $550,000
Queensland (QLD) $650,000 $500,000
Western Australia (WA) $550,000 $400,000
South Australia (SA) $550,000 $400,000
Tasmania (TAS) $550,000 $400,000
Australian Capital Territory (ACT) $600,000 Same price cap throughout the ACT
Northern Territory (NT) $550,000 Same price cap throughout the NT

Am I eligible for the FHLDS Scheme (New Homes)?

The following five key tests can best summarise the eligibility criteria for the FHLDS Scheme:

  • Citizenship and minimum age test: You should be an Australian citizen and over the age of 18 to qualify. If you’re applying as part of a couple, both of you should be citizens. Permanent residents are not accepted.
  • Income test: For single applicants, your taxable income should be less than $125,000; for couples, the combined income should be less than $200,000.
  • Prior property ownership test: You must have never owned a property or held an interest in a property before in Australia.
  • Owner-occupier test: The Scheme is provided to enable first home buyers to purchase a property to live in, as such investment properties are not accepted. The property must be an owner-occupied home.
  • Deposit requirement test: At a minimum, you should have at least 5% of the property value as a deposit in genuine savings. E.g. you’ll require a $25,000 deposit for a $500,000 property. You may need a higher deposit based on the lender you’re applying with and the type of property you’re buying. Please speak to your mortgage broker.

Which home loans are eligible for the FHLDS (New Homes)?

To be eligible for the FHLDS (New Homes), the home loan must be made by one of the 27 participating lenders and must be for the purchase of an eligible property that is to be occupied by you as the owner.

The home loan will also need to:

  • be for a term of 30 years or less,
  • have regular repayments of principal (with limited exceptions for interest-only loans, which mainly relate to building loans), and
  • comply with relevant laws and the lender’s credit policies.

What are some common challenges that may arise?

Some common challanges that may arise:

  • Finding a suitable new property that is under the property price threshold.
  • Finding a reputable builder or suitable land to build on within the time frame.
  • Few participating lenders like NAB are coming out saying they will not provide an extension to pre-approvals. So, customers need to be aggressive in their property search to make use of the scheme on time.
  • Construction of any kind usually gets delayed due to a myriad of reasons so completing the contract/completion in the time required will also likely be a challenge.
  • When purchasing a new property, whether it is a land plus construction or off-the-plan, the other possible issue could be a low valuation returned by the lenders. This wasn’t a typical problem with FHLDS before, as they were accepting established properties. Since the government shifted focus to boost employment in the building industry and allow for new properties only, this could be a new dilemma. Sometimes valuation can vary between lender to lender. Choosing an experienced broker that knows which lender is likely to provide an unbiased valuation is vital.

Additional resources released by the NHFIC


How do I reserve a place under the FHLDS (New Homes)?

First, you want to ensure that you’re eligible for the Scheme. Once that’s done, the next crucial step is deciding which participating lender to apply with.

You can apply to reserve your scheme place in the FHLDS (New Homes) through us or by applying directly with one of the 27 participating lenders – subject to availabilty of Scheme places.

Most of the participating lenders are accepting applications now.

What documents do I need to submit to reserve a scheme place?

When reserving a scheme place and applying for pre-approval, in addition to the standard income documents, you’ll need to provide:

  • A signed and dated First Home Loan Deposit Scheme Acknowledgement and Consent Form (this is lender specific, please speak to your mortgage broker).
  • Medicare ID number/position to reserve Scheme Place.
  • ATO Notice of Assessment (NOA) for the 2019-2020 financial year.

Which FHLDS lender should I apply with?

FHLDS lenders

When deciding which participating lender to apply with, you want to keep in mind that the lenders will still apply their own lending criteria before approving you for the home loan. As each first home buyers’ financial situation is different, each borrower will be suited to a different lender.

For example, the major lenders’ credit scoring system is highly selective, that is to say, they’ll automatically decline applications with low credit scores. Whereas, smaller lenders tend to be more flexible with credit scores, but then again, they are not as flexible with property location.

Also, some lenders are not accepting off-the-plan purchase applications or their construction loan policies might be too conservative.

Will I get approved?

It depends on their lending policy. Some of the areas where lender policies can differ are:

Fitting into all the neat little boxes of lender policies is hard, so the key as always is to apply with the right lender.

This is where an experienced mortgage brokers’ credit knowledge can help you get approved.

We recommend that first home buyers get their applications pre-assessed by our award-winning mortgage brokers.

You’ll only be issued a pre-approval (conditional approval) subject to satisfying all key eligible criteria of both the Scheme and the lender.

To apply and reserve a place in the First Home Loan Deposit Scheme (New Homes), speak with one of our specialist mortgage brokers by giving us a call on 1300 889 743 or fill in our short online assessment form.


Tips for applying to the FHLDS Scheme

  • Get in as quickly as possible, but be mindful. There are only a limited number of Scheme places available (10,000 each year).
  • Get your tax returns done. Applicants need to provide their Notice Of Assessment from the ATO. Essentially, if you are quick to lodge your tax return, then you can get in before everyone else and secure one of the limited spots in the Scheme.
  • Understand that this is a long-term commitment! Consider if there is a trade-off between taking advantage of the availability of this program, and living where you want to live (for instance: would you live further away from your friends/family/work to get access to this program, or would you prefer to be close to your friends/family/work in the longer term?).
  • Make sure you are able to borrow enough and consider the long term affordability by looking at your income and expense situation.
  • No genuine savings. Just because you have a 5% deposit does not mean you’ll be eligible, you’ll need a history of at least 3 months of savings, or alternatives like a rental ledger (paid rent as genuine savings) to meet the genuine savings requirement.
  • Check your postcode with the lender/broker.Lenders assess loans differently depending on the location of the property being offered as security. They apply stricter lending policies in high risk locations to limit their risk. In most cases, this means they often reduce the maximum available LVR and the maximum loan amount that you’re able to borrow.
  • If you’re going for land and construction, please get both the contracts finalised at once instead of going for land first and construction later.

What documents do I need to provide for formal approval?

After you’ve found a property and are ready to apply for formal approval, you’ll need to provide:

As part of the First Home Loan Deposit Scheme (FHLDS) New Homes, customers are required to obtain evidence from their vendor or builder that the property is newly-built and satisfies the FHLDS (New Homes) requirements. All FHLDS (New Homes) applications submitted for unconditional approval (final assessment) after your purchase must include one of the new National Housing Finance and Investment Corporation (NHFIC) Vendor/Builder Statements.

The statement required will vary, depending on the property type as follows:

  • For newly constructed dwellings and properties purchased through an off the plan arrangement, a statement from the builder using this NHFIC template must be attached.
  • For house and land packages, a statement from the vendor using this NHFIC template must be attached.
  • For land with a separate contract to build a home, a statement from the builder using this NHFIC template must be attached.
    • Note: The templates are only required on FHLDS (New Homes) applications, not regular FHLDS applications.


      FHLDS (New Homes): How much deposit do I need?

      You must have a minimum of 5% of the total value of property land plus construction as a deposit under the Scheme.

      Generally, the bigger the deposit, the better it is, but the minimum is only 5%.

      Please note that you’ll also need additional funds on top of the minimum deposit to cover for stamp duty, legal fees, loan fees etc. where applicable

      We strongly recommend that for land and a separate contract to build, you save up additional funds because the lender can’t release funds outside of the specified construction drawdowns.

      There’s nothing worse than running out of funds when your house is almost complete!


      FHLDS (New Homes): Eligibility

      Eligible building contracts

      For a building contract to be eligible under the First Home Loan Deposit Scheme (New Homes), it must:

      • be with a licensed or registered builder, and
      • specify a fixed price for the construction of the dwelling.

      Essentially, owner-builders and cost-plus construction contracts are not eligible under the Scheme.

      FHLDS (New Homes): Newly-constructed dwellings

      Under the Scheme, newly-constructed dwellings are properties that:

      • completed construction on or after 1 January 2020;
      • has not previously been sold as residential premises or previously been the subject of a long-term lease (i.e. 50 years or more). However, properties which have been substantially renovated by the vendor or built by the vendor to replace a demolished premises (i.e. a knockdown and rebuild) are eligible;
      • has not previously been rented or leased, or made available for rent or lease, as commercial residential or residential purposes;
      • has never been lived in; and
      • capable of being lived in from the date you settle.

      Also, First home buyers looking to purchase a newly constructed home/dwelling must:

      • enter into a contract of sale within their 90 day pre-approval period and
      • move into the property within six months of the settlement date.

      It’s worth pointing out that first home buyers looking to purchase a property to do their own substantial renovations or knockdown rebuilds are not eligible for FHLDS (New Homes).

      Case study: A couple is looking to buy a newly built house in a new development. The construction was completed in September 2020. The property was advertised for rent by the vendor on different platforms but didn’t find any takers.

      The newly built house is not eligible because the property was made available for rent whilst it was owned by the vendor.

      FHLDS (New Homes): off-the-plan dwellings

      Under the FHLDS (New Homes), an off-the-plan dwelling is where you enter into a contract of sale for the purchase of a property where at that time of entering into the contract of sale:

      • the title to the property has not yet been issued, or
      • if title to the property has been issued, it cannot yet be legally occupied, e.g. the building of the property has not yet finished.

      First home buyers looking to purchase off-the-plan must:

      • have a contract of sale dated on or after 7 October 2020, and
      • move into the property within six months of the occupancy certificate being issued.

      Case study: A couple sign a contract of sale in October for an off the plan property. The couple plan to use FHLDS (New Homes). The construction is scheduled to commence in November 2020 and expected to be completed by November 2021.

      This property could be eligible for the FHLDS (New Homes).

      FHLDS (New Homes): house and land packages

      Under the FHLDS scheme, a house and land package is where you enter into a contract of sale to purchase land from the same person (or persons within the same corporate group) as the person who you enter into a contract with to build your new home.

      First home buyers looking to build a new home under a house and land package must (prior to the expiry of the pre-approval period) enter into:

      • a contract of sale for the land; and
      • an eligible building contract dated on or after 7 October 2020 to build a new home on that land.

      First home buyers looking to build a new home under a house and land package must also:

      • start building a new home within six months of entering into an eligible building contract;
      • finish building within 24 months of starting; and
      • move into the property within six months of the occupancy certificate being issued.

      Case study: A couple signed a contract of sale in November 2020 for a house and land package. The construction is scheduled to commence in January 2021 and completed by November 2022.

      The property will be eligible under the Scheme because it meets all the eligibility criteria.

      FHLDS (New Homes): Land and separate contract to build a home

      A land and separate contract to build home is where you build a new home by entering into a contract of sale to acquire land from a person who is different to the person you enter into a contract with to build your New Home.

      First home buyers looking to build a new home under a land and build contract must acquire:

      • a contract of sale to acquire the land under a contract of sale or, (in the Australian Capital Territory) a leased instrument; and
      • an eligible building contract dated on or after 7 October 2020 to build a new home on that land.

      First home buyers looking to build a new home under a land and separate contract to build a home must also:

      • start building a new home within six months of entering into the eligible building contract;
      • finish building within 24 months of starting; and
      • move into the property within six months of the occupancy certificate being issued.

      Case study: A couple sign a contract of sale for a land and separate contract to build in November 2020. Construction is scheduled to commence in August 2021 and completed by October 2022.

      In this case, the couple will not be eligible. This is because the construction needs to commence within six months of entering into the building contract.

      Are substantially renovated properties eligible?

      Properties which have been substantially renovated by the vendor or built by the vendor to replace a demolished premises (i.e. a knockdown and rebuild) are eligible under the Scheme.

      Essentially, first home buyers cannot themselves purchase an existing home and plan to undertake a substantial renovation of an existing home or knock down and rebuild. It has to be through the vendor.

      This is because the Scheme was introduced to help both first home buyers and boost the residential construction industry including painters, builders, plumbers and electricians.

      Don’t qualify?

      Please not that if you’re unable to meet the timeframes or requirements for eligible properties under the FHLDS (New Homes), you may be able to apply to build or purchase a new home under the existing First Home Loan Deposit Scheme.


      Are you ready to reserve your FHLDS (New Homes) slot?

      We’re now reserving Scheme places for our customers subject to availability.

      Due to the limited number of slots on offer, you should ensure your application is “first-in-best-dressed” for the best possible outcome.

      To apply and reserve a place in the First Home Loan Deposit Scheme (New Homes), give us a call on 1300 889 743 or fill in our short online assessment form.

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