PHOTO: More than half of the spots in the scheme have already been taken up by first-home buyers. Photo: Peter Rae

Prospective first-home buyers are legally exploiting loopholes in two popular federal government schemes to get into the property market sooner.

Savers have been taking cash out of their superannuation using an emergency withdrawal scheme set up for the COVID-19 pandemic-induced recession, then putting the funds towards a deposit.

With up to $10,000 in withdrawals allowed for this financial year and the same amount for the 2019-20 financial year just gone, the money can help buyers qualify for the federal government’s First Home Loan Deposit Scheme.

The scheme helps borrowers to purchase with only a 5 per cent deposit without paying lenders’ mortgage insurance.

Once the funds have been sitting in a bank account for three months, some lenders will count the cash as genuine savings.

Although buyers are playing by the rules, experts caution against this approach.

Sydney-based Mortgage Choice broker Rob Lees said there has been strong demand for the deposit scheme with several applicants using their super to meet the 5 per cent minimum deposit.

“A lot of people have withdrawn their super … the government made that available but you didn’t have to provide any evidence,” he said. “Because they’ve sat on it for the three months, it meets the banks’ criteria of genuine savings.”