The new financial year has kicked off with a bang for first home buyers! A whopping 45,000 more places have opened up for them under the Home Guarantee Scheme, as well as 5,000 more spots for single parents. Here’s how it could help you buy a home sooner.
Home ownership has long been the great Australian dream, but high property prices are making it tough to save a 20% deposit for many young families.
That’s where the federal government’s Home Guarantee Scheme (HGS) comes in.
It gives first home buyers a leg up into the property market even if they have just a 5% deposit, and it’s proving to be very popular.
Let’s take a closer look at what’s involved by answering a few FAQs.
What is the Home Guarantee Scheme?
The HGS helps first home buyers and single parents buy a place of their own even when they have a small deposit.
Essentially, the government acts as a guarantor for the home buyer’s loan, so there is no need to pay lenders mortgage insurance, which can be a big saving on upfront costs.
In fact, not paying LMI can save buyers anywhere between $4,000 and $35,000, depending on the property price and deposit amount.
Who does the scheme help?
The HGS covers three separate programs, each with a different type of home buyer in mind.
The First Home Guarantee helps eligible first home buyers get into the market with as little as a 5% deposit. From 1 July 2024, an extra 35,000 places became available.
The Regional First Home Buyer Guarantee is dedicated to helping first home buyers who live in regional areas buy a home with just a 5% deposit. An extra 10,000 places have opened up for the 2024-25 financial year.
The Family Home Guarantee supports eligible single parents to buy a home with as little as a 2% deposit. This will help up to 5,000 families this financial year.
Am I eligible for the Home Guarantee Scheme?
You’ll need to tick a few boxes to be eligible for the HGS.
In particular, there are limits around the maximum purchase price for a home under the scheme. The upper limits vary between cities and across regional areas from state to state, and are adjusted each financial year.
One way to find out if you’re eligible is to call us and we can walk you through the various requirements.
Do all banks support the Home Guarantee Scheme?
No. Lenders choose to be part of the HGS, and while there is a reasonably wide choice of banks to pick from, not all lenders have signed up.
The Real Estate Institute of Australia says the “best way to see if you can qualify for the scheme and seek pre-approval is to speak with a mortgage broker”.
To date, mortgage brokers have secured up to 80% of the HGS placements, and we can guide you through the application process, answer any questions you may have about buying a first home, and recommend a home loan option suited to your needs from the lenders that are part of the scheme.
Call us today to find out more about buying with a 5% deposit – and zero lenders mortgage insurance. You could be in your own home a lot sooner than you expected!
Zippy Financial is an award-winning mortgage brokerage specialising in home loans, property investment, commercial lending, and vehicle & asset finance. Whether you are looking to buy your first home, refinance or build your property investment portfolio, the team at Zippy Financial can help find and secure the right loan for you and your business.
About the Author:
Louisa Sanghera is an award-winning mortgage broker and Director at Zippy Financial. Louisa founded Zippy Financial with the goal of helping clients grow their wealth through smart property and business financing. Louisa utilises her expert financial knowledge, vision for exceptional customer service and passion for property to help her clients achieve their lifestyle and financial goals. Louisa is an experienced speaker, financial commentator, mortgage broker industry representative and small business advocate.
Louisa Sanghera is a Credit Representative (437236) of Mortgage Specialists Pty Ltd (Australian Credit Licence No. 387025).
Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.
Unlocking Home Ownership: A Closer Look at the Family Home Guarantee
Owning a home is a dream for many, but for single parents, it can sometimes feel out of reach. The Australian government’s Family Home Guarantee aims to change that narrative, offering a beacon of hope for eligible single parents striving for home ownership. This initiative is a testament to the government’s commitment to making housing in Australia more accessible.
Understanding the Family Home Guarantee
The Family Home Guarantee is a groundbreaking initiative designed to assist single parents in overcoming the often-daunting barrier of hefty deposits. Instead of the traditional 20% deposit, this scheme allows eligible single parents to enter the housing market with as little as a 2% deposit. The government then acts as a guarantor for the remaining amount, ensuring that more families have a place to call home.
Property Market Implications
Market Accessibility: Discussing how the Family Home Guarantee impacts the ability of single parents to enter the property market and the potential increase in homeownership rates.
Market Trends: Analyzing how this initiative might influence the demand for certain types of properties, such as family homes and apartments.
Local Housing Markets: Considering the effects of the Family Home Guarantee on specific regional housing markets.
Financial Considerations and Future Prospects
Long-Term Financial Benefits: Outlining the potential long-term financial advantages of homeownership through the Family Home Guarantee, including wealth accumulation and equity building.
Financial Responsibility: Advising on the financial responsibilities associated with homeownership, such as mortgage repayments, property maintenance, and budgeting.
Future Possibilities: Speculating on the expansion of the Family Home Guarantee program and its potential influence on government housing policies.
Who is Eligible?
Eligibility is centered around supporting single parents, irrespective of whether they are first-time homebuyers or re-entering the housing market. Key criteria include:
Being a single parent (with at least one dependent child).
Meeting specific income caps.
Purchasing a property that falls within the price threshold specific to the region.
For instance, Jane, a single mother of two in Melbourne, was able to purchase her first home through the Family Home Guarantee, despite having only a modest deposit saved up.
Navigating the Application Process
The application process is straightforward. Begin by checking your eligibility, then approach one of the participating lenders. These lenders will guide you through the application, ensuring you understand every step. Over time, the list of participating lenders has grown, reflecting the program’s success and the financial sector’s trust in it.
Benefits and Considerations
The immediate benefit of the Family Home Guarantee is clear: reduced deposit requirements. This translates to:
Faster access to the property market.
Potential savings on rent.
Building equity in a property sooner.
However, it’s essential to consider the broader financial landscape, including current interest rates and the long-term implications of starting with a smaller deposit.
Success Stories and Program Impact
Since its inception, the Family Home Guarantee has transformed lives. Single parents, once uncertain about their housing future, now find themselves homeowners, building a secure foundation for their families. The ripple effect on the economy is undeniable, with increased property sales and a boost in consumer confidence.
Expert Insights and Tips
Financial advisors and mortgage brokers emphasize the importance of understanding the nuances of the Family Home Guarantee. While it’s a fantastic opportunity, it’s crucial to assess your financial situation and long-term goals. Remember, while the program aids in purchasing, maintaining a home requires a stable income and financial planning.
The Family Home Guarantee is more than just a policy; it’s a commitment to the single parents of Australia. It recognizes the challenges they face and offers a tangible solution. If you’re a single parent dreaming of owning a home, this might be the key to unlocking that dream.
Frequently Asked Questions
What is the Family Home Guarantee?
The Family Home Guarantee is a government initiative designed to assist single parents in entering or re-entering the housing market with a minimal deposit.
Who is eligible for the Family Home Guarantee?
Single parents, regardless of whether they are first-time homebuyers or previous homeowners, can benefit from the Family Home Guarantee, provided they meet specific income and other eligibility criteria.
How does the Family Home Guarantee work?
The program allows eligible single parents to purchase a home with as little as a 2% deposit, with the federal government guaranteeing up to 18% of the loan, reducing the need for Lenders Mortgage Insurance (LMI).
How does the Family Home Guarantee differ from the First Home Loan Deposit Scheme?
While both schemes aim to help Australians achieve homeownership with a reduced deposit, the Family Home Guarantee specifically targets single parents, regardless of their first-time homebuyer status.
How many places are available under the Family Home Guarantee?
The government has allocated a limited number of spots for the Family Home Guarantee, making it essential for interested individuals to apply as soon as they’re ready.
Can I access other government grants or schemes along with the Family Home Guarantee?
Yes, eligible individuals can often combine the Family Home Guarantee with other state and federal homeownership incentives, but it’s essential to check specific eligibility criteria for each.
Zippy Financial is an award-winning mortgage brokerage specialising in home loans, property investment, commercial lending, and vehicle & asset finance. Whether you are looking to buy your first home, refinance or build your property investment portfolio, the team at Zippy Financial can help find and secure the right loan for you and your business.
About the Author:
Louisa Sanghera is an award-winning mortgage broker and Director at Zippy Financial. Louisa founded Zippy Financial with the goal of helping clients grow their wealth through smart property and business financing. Louisa utilises her expert financial knowledge, vision for exceptional customer service and passion for property to help her clients achieve their lifestyle and financial goals. Louisa is an experienced speaker, financial commentator, mortgage broker industry representative and small business advocate.
Louisa Sanghera is a Credit Representative (437236) of Mortgage Specialists Pty Ltd (Australian Credit Licence No. 387025).
Disclaimer:This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information. This article is not to be used in place of professional advice, whether business, health or financial.
RELATED ARTICLES
Rental Crisis: Turning to Homeownership in Australia
The Family Home Guarantee is an Australian Government initiative that aims to support eligible single parents with dependants in purchasing a family home.
From 1 July 2021, 10,000 Family Home Guarantees will be made available over four financial years to eligible single parents with dependants, subject to their ability to service a loan.
The Family Home Guarantee can be used to build a new home or purchase an existing home with a deposit of as little as 2 per cent, regardless of whether that single parent is a first home buyer or a previous owner-occupier. Investment properties are not supported by the Family Home Guarantee.
How Does the Family Home Guarantee Work?
Eligible single parents with dependants looking to build a new home or purchase an existing home are able to apply for a loan to purchase an eligible property through a participating lender.
The Family Home Guarantee program is administered by the National Housing Finance and Investment Corporation (NHFIC) on behalf of the Australian Government.
NHFIC guarantees to a participating lender up to 18 per cent of the value of the property, provided the borrower has a minimum 2 per cent deposit, and is eligible for the program.
This will enable single parents with dependants to enter, or re-enter, the housing market sooner.
What Types of Properties are Eligible?
For a property to be eligible under the Family Home Guarantee, it must be a residential property – this term has a particular meaning under the program and is consistent with the First Home Loan Deposit Scheme.
Eligible residential properties generally include:
an existing house, townhouse or apartment
a house and land package
land and separate contract to build a home
an off-the-plan apartment or townhouse
Who is Eligible for the Family Home Guarantee?
Australian citizens who are at least 18 years of age. Permanent residents are not eligible.
Must be a single parent with at least one dependant.
The single parent must have a taxable income that does not exceed $125,000 per annum for the previous financial year. NB: Child support payments are not included as income for the purpose of the income cap.
The single parent must be the only name listed on the loan and the certificate of title.
It is expected that the single parent demonstrate that they are the natural or adoptive parent of a dependent child within the meaning of s.5 of the Social Security Act 1991 (Cth). In a general sense, this means that the person must show that they are legally responsible (whether alone or jointly with another person) for the day-to-day care, welfare and development of the dependent child and the dependent child is in their care. Depending on the terms of any shared custody arrangement, this may enable both individuals in a former couple to separately access the Family Home Guarantee.
Individuals must have at least 2 per cent of the value of the property available as a deposit. If the borrower has a deposit of more than 20 per cent, then the home loan cannot be covered by the Family Home Guarantee.
Loans under the Family Home Guarantee require scheduled repayments of the principal and interest of the loan for the full period of the agreement. The loan agreement must have a term of no more than 30 years.
Applicants must intend to be owner-occupiers of the purchased property. In the case of active Australian Defence Force member applicant(s), the guarantee is not subject to the owner- occupier requirement after entering into the loan if they cannot meet this requirement because of their duties.
Applicants can be either first home buyers or previous owner-occupiers who do not currently own a home. That is, the applicant must not currently have a freehold interest in real property in Australia, a lease of land in Australia or a company title interest in land in Australia.
The eligibility criteria must be satisfied at the time the loan agreement is entered into. More information on eligibility criteria for the Family Home Guarantee will be outlined in forthcoming amendments to the National Housing Finance and Investment Corporation Investment Mandate Direction 2018.
What Property Price Thresholds Apply for the Family Home Guarantee?
The property price thresholds for the Family Home Guarantee will be the same as those applying to the First Home Loan Deposit Scheme.
The capital city price thresholds apply to regional centres with a population over 250,000 (Newcastle & Lake Macquarie, Illawarra (Wollongong), Geelong, Gold Coast and Sunshine Coast), recognising that dwellings in regional centres can be more expensive than other regional areas.
For the territories of Jervis Bay Territory, Norfolk Island, Christmas Island and the Cocos (Keeling) Islands, the relevant price cap is the same as the rest of state cap that applies in the closest State – New South Wales (for Jervis Bay Territory and Norfolk Island) and Western Australia (for Christmas Island and the Cocos (Keeling) Islands).
How to Apply?
Eligible single parents will be able to apply for the Family Home Guarantee through a FHLDS participating lender.
There are no costs or repayments associated with the guarantee. However, eligible single parents are responsible for meeting all costs and repayments for the home loan associated with the guarantee.
NHFIC will not accept applications directly and does not maintain a waiting list for places, including for the additional guarantees to be made available.
Comparison Rate calculated on a secured loan amount of $150,000 for a term of 25 years. WARNING: This Comparison Rate is true only for the example given and may not include all fees and charges. Different terms, fees and other loan amounts might result in a different Comparison Rate. Fees and Charges Apply. Terms and Conditions are available on request.
