Australian Home Buyer Grants and Schemes: How to Buy a Home with a 5% Deposit.
Buying your first home is no easy feat, especially when it comes to saving for the deposit. Fortunately, there are several Australian Government home buyer initiatives designed to help buyers enter the property market sooner.
One of these initiatives is the 5% Deposit Scheme. The Australian Government’s 5% Deposit Scheme helps make home ownership more accessible by reducing one of the biggest barriers to buying a home, saving a large deposit.
How to buy a home with a 5% Deposit?
Traditionally, most lenders require a 20% deposit before approving a home loan. For many Australians, saving this amount can take years and delay their entry into the property market.
The 5% Deposit Scheme allows eligible buyers to purchase a home with as little as a 5% deposit, provided they can comfortably service their mortgage repayments. This low deposit home loan helps reduce the time spent saving and helps first home buyers into their own home sooner.
The Key Benefits
Enter the Market Sooner
One of the biggest advantages of the scheme is that it reduces the amount of time needed to save a deposit. Instead of waiting years to reach a 20% deposit target, eligible buyers can purchase sooner and begin building equity in their own home.
Access a No LMI Home Loan
Normally, when purchasing a home with less than a 20% deposit, lenders require borrowers to pay Lenders Mortgage Insurance (LMI). This insurance fee is in place to protect the lender in case of default and is seen as another expense and barrier to home ownership.
Under the 5% Deposit Scheme, the Australian Government acts as a guarantor for a portion of the loan, allowing eligible buyers to access what is effectively a no LMI home loan and avoid paying lenders mortgage insurance. This can result in lower upfront costs and significant savings to the overall cost of your loan.
How Does the Australian Government 5% Deposit Scheme Work?
While the Government provides a guarantee to your lender to help you get a loan with a small deposit through the scheme, your mortgage remains entirely between you and your lender. You continue to make your repayments as normal and retain full ownership of your property.
It’s important to note that the Government does not contribute towards your repayments or hold an ownership stake in your home under this scheme.
Because you’re borrowing a larger amount with a smaller deposit, your loan repayments may be higher than if you had saved a larger deposit. Many homeowners choose to make additional repayments over time to reduce their loan balance faster and build more equity sooner.
Things to Keep in Mind
In recent years, the scheme has become more accessible, with previous applicant caps and income restrictions being relaxed. Property price caps have also increased, allowing more Australian’s to buy a home with 5% deposit.
Property price limits still vary depending on your state, capital city or regional location, so it’s important to check the current thresholds that apply to your area.
To apply, you will need to speak with an eligible lender or a mortgage broker to confirm your eligibility and determine whether this scheme is the right fit for your circumstances.
With multiple first home buyer schemes available and varying eligibility criteria, it’s important to understand which option best suits your needs.
For more information on this and other first home buyer programs in Australia, visit the Australian Government website.
You can also speak to our friendly sales team on 1300 888 181 or via email at info@marigoldtarneit.com.au.
