The first home owner grant has no doubt assisted many first home buyers with their low deposit or no deposit home loan.  In some cases the $7,000 grant takes care of all the purchase costs and may even allow for a new coat of paint when you move in! 

If you do not have adequate savings for a deposit but can afford the mortgage repayments on a home, then you can take out a no deposit mortgage and use your FHOG to cover all the extra purchase costs.

Everyone knows that the more you save as a home deposit the less you will need to borrow, and therefore the less interest you will need to pay on your mortgage. Each lender will vary the size of the deposit needed but usually around 10% of the purchase price is required.  Any less than this and you will have to pay lenders mortgage insurance (LMI).

If you do take out a no deposit mortgage you can use your first home owner grant to cover the cost of the LMI as well as other costs.  These might include legal fees, settlement fees, property inspection charges and stamp duty fees.  

Obviously there are risks associated with a no deposit mortgage.  If you take out a no deposit mortgage and borrow 100% of the purchase price, you often end up paying more in interest.  And how will you afford all the extra costs that may come up after settlement?  Do you have enough room in your budget to accommodate for any surprises along the way?

The First Home Owners Grant was increased in 2008 but is now due to be reduced as of 31 December 2009.  The original first home owners grant of $7,000 is still available to eligible first home buyers after this date.  This $7,000 is still a considerable help to many first time owners.


As with all financial commitments it is a good idea to seek professional advice.  Before choosing a no deposit home loan talk to a mortgage broker about your financial goals, your current situation and let them provide you with the answers you seek.  You can find a mortgage broker in your area by calling or by submitting your details on line.