Pros and Cons of First Home Loan Deposit Scheme

If you’re familiar with the property market or currently on the hunt for a new home, you’ll see that Australia’s housing crisis is in dire need of solutions. In a country where home ownership offers a significant source of security of housing tenure as well as long-term social and economic benefits, it’s baffling that only 67% of Australians were able to secure a home. Those who cannot enter the property market are forced to turn to the rental market and, consequently, drive housing prices up in just the past 5 years.

In early 2020, the Federal Government commenced the first initiative to address this housing issue called the First Home Loan Deposit Scheme. This program allows first-home buyers to purchase a home with a deposit of as low as 5%, with the government guaranteeing 15% of the property value.

For the 2022-2023 financial year, the government will provide a total of 50,000 places under this scheme. The big jump from the previous financial year allows for more subscribers to enter the property market.

Like any benefit scheme, the FHLDS comes with a number of pros and cons. Let’s take a closer look at what this recent initiative has to offer and the risks that come with it.

Benefits of FHLDS

Eliminating Lenders Mortgage Insurance Costs

The biggest advantage that FHLDS offers is that it eliminates LMI expenses, which generally cost 3%-4% of the purchase price. This waiver allows first-home buyers to allocate that expense as a deposit instead, giving them the momentum to enter the property market much sooner.

Multiple Housing Options

First-home buyers can use the FHLDS to purchase the following property types:

  • An existing house or apartment
  • A house and land package
  • A vacant land
  • An off-the-plan home

Financial Security in Retirement

Becoming a homeowner means that your mortgage repayments will go towards paying off your home loan. Having ownership of your home’s capital growth creates security in retirement and a full return on investment.

Risks of FHLDS

Higher Repayments and Interest

Buying a home with low deposits means higher repayments. It also means that first-home buyers must pay more interest over the life of the loan term, facing the risk of ending up with negative equity. 

Limited Quota

The FHLDS only supports 50,000 first-home buyers within the 2022-2023 financial year. Those who aren’t eligible for the scheme will have to compete with the ones who do, driving demand for real estate even higher.


Despite being designed to benefit first-home buyers with financial challenges, the First Home Loan Deposit Scheme may only be suitable for a smaller pool of buyers who can take on the risks. Therefore, it’s best to consult your financial needs with a finance broker first before jumping on the bandwagon.

If you’re looking for a finance mortgage broker in Perth, Southstead Finance is more than ready to help. As an accredited finance broker, we can help compare the available loans from reputable lenders across the nation most suitable for your situation and needs.

Credit Representative 525543 is authorised under Australian Credit Licence 38928. Your full financial needs and requirements need to be assessed prior to any offer or acceptance of a loan product.

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Southstead Finance provides personal lending advice and solutions for home buyers and investors who want the freedom to live the life they want.

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