Elizabeth Daoud | 1 July 2020

Thousands of first home buyers can apply for the scheme from July 1. Credit: Getty Images

Thousands of first home buyers will be able to apply for the federal government’s deposit assistance scheme from Wednesday.

The First Home Buyers Deposit Scheme allows people with just a five per cent deposit to enter the property market and avoid Lenders Mortgage Insurance (LMI).

The deposit scheme opened to 10,000 buyers in the first half of 2020, with 10,000 more spots becoming available on July 1.

Insight Manager at Finder Graham Cooke explained there are both positives and downsides to the scheme.

“The positives are obviously that you can get a lower step on the ladder into the property market and you only need a five per cent deposit,” he told 7NEWS.com.au.

“It reduces the burden of spending a long time saving to get on the housing market.

The scheme will help thousands of people enter the property market. Credit: Simon McGill/Getty Images

“The negative is you’re obviously going to be borrowing more from the banks.

“So every extra few thousand dollars you borrow from the bank you are going to probably be paying back about double that to the bank over the course of the mortgage.

“It’s a little costlier in the long run.”

Cooke added first home buyer schemes tended to have a range of eligibility restrictions.

For the First Home Buyer Deposit Scheme, applicants in Sydney must be purchasing a property valued at $700,000 or less.

In Melbourne, that threshold is $600,000.

Adelaide and Perth’s thresholds are $400,000 while Brisbane’s is $475,000.

“If you’re going to buy a new home or even an existing home in Sydney or Melbourne, you’ll struggle to find something below that cost… it’s more likely to apply to an apartment,” Cooke said.

The struggle is real

The spots in the scheme come as new research shows more than 50 per cent of first home buyers struggle to navigate the property market.

A survey from Aussie home loans found 71 per cent of first home buyers want to take advantage of the current market conditions but don’t know how.

It also found a majority of first home buyers – 85 per cent – don’t know about the government’s deposit scheme.

Aussie Chief Customer Officer David Smith said now is a great time for Australians looking to buy their first house.

“With some of the lowest home loan interest rates we’ve ever seen, alongside a fall in property prices, and the government launching new grants and schemes, this represents a huge opportunity for Australians to secure their first home,” Smith said in a statement.

“However, it’s clear that those same factors are leading to ‘information overload’ which could be preventing first home buyers from making their move.

“Our research reveals just how overwhelming the property market can be, whether it’s the complex lingo, the changing schemes and grants, or understanding what different interest rates mean; it’s not surprising that many first home buyers find it difficult to know if they are getting a good deal.”

Source: https://7news.com.au/business/finance/governments-first-home-buyer-deposit-scheme-opens-to-thousands-more-c-1136671