First Home Loan Deposit Scheme becomes IP

Hi everyone,

This is my first time posting here and I have a question about the FHLDS where you can borrow 95% without LMI for your first home.

I have recently purchased a new home under the scheme, as well as receiving the $10k FHOG and stamp duty exemption.

I understand that there are legal requirements which mean I must owner-occupy the property for a minimum 12 months, otherwise the State Revenue Office could come after me to pay back the $10k FHOG.

My question is: following that 12 month period of being an owner-occupier, what is stopping me from then renting out the property while it is still under the FHLDS scheme?

I have read in the FHLDS information brochure that loans may become ineligible for the scheme if the owner-occupier requirement is not maintained, and that the borrower might be subject to paying lenders mortgage insurance on the loan.

But how would the bank find out that I was no longer the owner-occupier if I were to rent it out? Is it illegal to ‘deceive’ the bank in this way? What could be the penalties involved if I were to do this and the bank found out?

Thank you to anyone who can provide me with any constructive information!

Jamie

 

Yes, it would be illegal. I don't know what the penalties are - just don't do it.

 

The lender and borrower are BOTH obliged to maintain the loan to FHLDS standards at all times until the loan reflects as 80% LVR or less.. The lender can address this question. You may be required to obtain commercial LMI and bank approval. Its possible the loan covenant could be breached too and they could just demand repayment for default. Ask your solicitor. Its not "illegal" as this suggests a crime but it may be a default with costly consequences and arguring you didnt know wont be a excuse. A black flag on a credit file perhaps.

 

Hi guys, I’m in the same boat as OP (although looking to do the right thing, just trying to understand my options).

I’m eleven months into my property purchase which included the FHLDS, stamp duty exemption and Defence Home Ownership Assistance Scheme. It is a one bedroom apartment in the Canberra CBD, dual residential/commercial zoned, generously sized (around 80-90 square metres internal plus a balcony and courtyard). I originally put 5% down of the $485k asking price and the loan balance is now down to $432k, so about 10% is paid off. Loan is fixed for three years then reverting to variable with Defence Bank (only several bank options available when using DHOAS).

My question is, since I’m positioning to buy an investment property in the next few years, in order to tap into the little bit of equity this place has generated, I’ll need to get 20% paid off first (in order to close out the FHLDS requirements), correct? Or should I aim for 30% repaid to have the 10% to draw on (plus maybe about 5% extra in capital growth) and avoid LMI by not dipping below the 20% threshold? Alternatively, do I just drop down to minimum repayments ($1510 per month) and save the surplus to put down a deposit on the IP? I currently clear $8k per month from two jobs.

My place is extremely liveable, absolutely perfect for me and I plan on staying here for at least the next 2-3 years. My investment strategy is to accumulate several high yield apartments over the coming years, with less emphasis on capital growth. Would greatly appreciate your advice on my questions above or your insight on if there’s a better way for me to achieve this. Feel free to ask for additional info as required. Thanks!

 

So Rolf are you saying that because this mortgage utilised the FHLDS I’ll never be able to dip into the redraw, even after I’ve paid off more than 20% to meet/remove the FHLDS facility requirement?