Frequently Asked Questions about First Home Loan Deposit Scheme (FHLDS)
Looking to utilise FHLDS to get into the property market this year? Well, we have compiled together the list of the most frequently asked questions (FAQ) so you can check this yourself before jumping onto the FHLDS!
What is the process of utilising FHLDS to secure my home?
- Request for scheme reservation – liaise with your broker or bank to submit a scheme reservation. You may need to complete & sign forms to satisfy this step and if successful, you’ll receive a scheme place reservation confirmation.
- Submit application and obtain pre-approval – once scheme reservation is in place, you have a certain period of time (usually 2 weeks) to have pre-approval submitted along with all supporting documents. You would want to obtain the pre-approval from lender before end of the 2 weeks period
- Secure a property – from the date of pre-approval you have up to 90 days to secure a property and obtain formal approval. Once formal approval has been granted then the lender can apply for Scheme Guarantee Certificate and link it up to the applicatoin
- Settle the first home – from the date Scheme Guarantee Certificate is received, customers have 100 days to settle the property.
Do I have to use all my deposit? Or can I just use 5% deposit and hold the rest back for something else?
In short you are not required to use all of your available deposit, assuming that genuine savings criteria is met. Any eligible person with a deposit of minimum 5% up to (but less than) 20% are eligible for the scheme.
If you’re going above 90% LVR, make sure you check with your bank/broker to ensure genuine savings crtieria are met. It may vary for different lenders.
I’m single and my current income is higher than $125000. But my last year’s Notice of Assessment (NOA) shows I’m below $125000. Am I eligible to apply for the scheme?
Yes! FHLDS Scheme income eligibility is based on prior year’s NOA figure. FHLDS does not require you to look at the income you’re earning at time of application.
I have already lodged a Scheme place reservation with Lender X but would like to apply for a loan with Lender Y. Can I do that?
Yes! However you need to be mindful that Scheme reservation is allocated per customer. You cannot have 2 scheme reservations at same time. If you have not obtained the pre-approval within 2 weeks from lodgement of the initial scheme reservation then that one will expire.
What will happen if I no longer wants to live in this property and rents it out?
OK, if you choose to no longer live in the property the loan Guarantee Certificate will be cancelled/revoked. At that time an internal refinance may have to take place and depending on the LVR, you may need to pay LMI.
Do I have to pay back the guarantee amount?
When the home loan balance is reduced down to 80% of the LVR, the Guarantee Certificate will expire and the Guarantee is then released from the loan. There will be no funds required from the customer other than paying down the loan balance and any subsequent interest charges.
I want to build a new house to live in instead of buying established. I have already settled the land, am I eligible for FHLDS?
Unfortunately no. If you already own or has previously owned land or real property then you won’t be eligible for the FHLDS.
If the property I want to purchase has an existing tenant, can I continue to lease it out prior to moving in and still be eligible to apply for the FHLDS? I mean, it WILL be my home and I intend to move into it later on, just that there is a tenant in there.
Maybe! FHLDS specifies that the applicants inted to move in and live in the property as their home at time of settlement. This is to meet bank policy for Owner Occupier property use. So if you are intending to continue to rent out the property then lenders will need to select Investment Loan instead which then is not eligible for the FHLDS scheme.
However some lenders may be willing to consider this on an exception basis – so make sure you seek an exception prior to requesting a FHLSD scheme reservation.
Still cannot find the answers you want from any of above? Feel free to reach out to us via the contact page so we can discuss further your FHLDS needs!