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Compare the Government Home Equity Scheme with Mum n Dad's Home Deposit Assist.

Updated: Jan 17

The federal government's First Home Loan Deposit Scheme guarantees mortgages for first home buyers who have only saved a 5% deposit, effectively helping them buy sooner without paying lenders mortgage insurance

The First Home Loan Deposit Scheme came into effect on 1 January 2020.



The First Home Loan Deposit Scheme explained

If you've saved 5% of the purchase price of your property the government can guarantee the remaining 15% of the deposit. saving you LMI . Access to the scheme is limited to 10,000 borrowers. You need to borrow the remaining 95%, but you can avoid LMI. Your mortgage needs to be an owner-occupied loan with principal-and-interest repayments. Eligible first home buyers can't be earning more than $125,000 a year ($200,000 combined for couples). The value of eligible homes under the scheme varies by state and city/region (see property value caps below).


Mum n Dad don't have limitations on their Equity. It is available to anyone who qualifies for a home loan . Unlike the Government , Mum n Dad limits provides you to $ 30,000 to approved applicants .. go to mumndad.com.au



You can take a quick quiz on the NHFIC's website to see if you're eligible for the scheme.


What are the benefits of both schemes?

The scheme allows you to get a home loan sooner because you only have to save a smaller deposit. 5% deposit home loans already exist, but you need to pay LMI when borrowing more than 80% of a property's value.


With the first home loan deposit scheme, you save time, because you can save a 5% deposit in a quarter of the time it would take to save 20%. You also avoid the LMI premiums, which can cost thousands of dollars (you can get LMI estimates using Genworth's LMI calculator).


But if you haven't saved 5% MumnDad. com.au can still help you out. Our model shows you will have around 10 % of the price. Even more if you are a first home buyer.



But there is a downside to the Governemtn scheme. Saving a smaller deposit and borrowing more money means paying more interest over time. Let's break it down with the example of a $400,000 property and a 5% deposit versus a 20% deposit:

Property cost = $400,000 Deposit = $20,000 (5%)

Loan amount = $380,000

Interest rate = 4.00% over 30 years

In this scenario your costs are as follows:


LMI = $12,768

Monthly repayments = $1,814

Property cost = $400,000

Deposit = $80,000 (20%)

Loan amount = $320,000

Interest rate = 4.00% over 30 years

In this scenario your costs are as follows:


LMI = $0

Monthly repayments = $1,527


If you wanted to save a 20% deposit you'd need an extra $60,000 (but no LMI). This would equal around 33 months of mortgage repayments with a 5% deposit.

But with a 20% deposit, your repayments would be noticeably cheaper, at $1,528 a month.

That's $286 a month less.


Skipping the LMI means you buy the property faster and save $12,768 in LMI costs. But you'll pay $103,122 more in interest costs over 30 years with a 5% deposit.

But what if property values rise fast?

It's impossible to predict, but rising property prices could make the scheme more appealing. If your property rises in value while you're paying it off you're gaining equity (even while paying more interest). the main question is if prices don't go up, what then?


And if you're still saving for that 20% deposit while prices keep rising, the amount of money you'll need to save will only continue to grow over time. You could get stuck.


Who is eligible?


Only Australian citizens are eligible (not permanent residents). Whereas with Mum n Dad PR can apply.

You will need to be a first home buyer (if you own an investment property you won't be eligible but you will be under Mum n Dad ( HDA ) earning $125,000 ($200,000 for a couple) a year or less.

The scheme is limited to 10,000 borrowers.

The scheme is open to a range of property types, including apartments, townhouses, house and land packages, and existing houses. It is not limited to newly-built or off the plan purchases (unlike some first homeowner grants). With Mum n Dad it's only available to approved new homes or townhouses whereas the government scheme you most likely won't get a new home as you need to setltle within 90 days. Mum n Dad don thave restrictions .


Couples must be married or in de facto relationships. Friends or siblings cannot qualify for this scheme together.


Property value caps


To be eligible for the scheme you must be purchasing a property valued at or below the following thresholds:



How do I apply for the First Home Loan Deposit Scheme?

You can apply directly with any lender participating in the scheme (see the full list of lenders below). You cannot apply for the scheme directly through the NHFIC.

The Commonwealth Bank and NAB accept applications from 1 January 2020 and smaller lenders take applications from 1 February 2020.

You should also consider Mum n Dad HDA on line www.mumndad.com.a

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We use our relationships to be the gateway between the equity provider and use that to secure a new home and home loan from one of our loan experts. Get to know more about home deposit assistance here...

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