The thought of purchasing a home in today’s market might seem far-fetched, which is why the Australian Government has introduced the Home Guarantee Scheme, to support lower-income earners in entering the property market. Coughing up a 20% deposit may seem an impossible task for many, but with the new Guarantee, Aussies will be able to purchase or build a home with a deposit as low as 2%. Furthermore, buyers will avoid Lenders’ Mortgage Insurance, as the government guarantees their loan.
From 1st July 2022, the government has expanded the previous First Home Loan Deposit Scheme to introduce:
- First Home Guarantee
- Family Home Guarantee
- Regional Home Guarantee
Under the Home Guarantee Scheme, eligible first home buyers can purchase a modest property that does not exceed the price cap for their relevant area. For example, the property price cap for capital city and regional centres in New South Wales is $900,000 and $750,000 for the rest of the state.
Across the country, 32 lenders will offer the scheme, including Credit Union SA, Illawarra Credit Union, IMB Bank, Commonwealth Bank, and NAB, offering various options for borrowers.
The First Home Guarantee (FHG) will support up to 35,000 places each financial year, enabling eligible first home buyers to purchase a home with a 5% deposit. Under the new FHG, the National Housing Finance and Investment Corporation (NHFIC) will guarantee to a lender up to 15% of the value of the property that is financed by the buyer’s loan. Low- and middle-income earners can now purchase their first home sooner and avoid paying Lenders’ Mortgage Insurance.
Lenders’ Mortgage Insurance protects the lender in case the borrower defaults on their loan repayments, usually if borrowing over 80% of the property value. With the FHG, the government will guarantee your loan. As part of the scheme, you’ll save money by not paying Lenders’ Mortgage Insurance or the interest associated with it.
The Family Home Guarantee will support up to 5000 places each financial year for single parents to purchase a home with a 2% deposit. Single parents with at least one dependent child are eligible, regardless of whether they have previously owned a home. By contributing a minimum 2% deposit, the NHFIC will guarantee up to 18% of the loan to the lender.
The Regional Home Guarantee allows Australians to purchase a home in a regional location with a 5% deposit. To avoid paying LMI, the government will guarantee the loan. However, this Guarantee is available only to those who have not owned a home for at least five years.
There are eligibility criteria that need to be met for Australians to apply for the scheme including but not limited to:
- Household income thresholds (up to $125,000 for individuals and $250,000 for couples)
- Property price caps
- Prior ownership of a property
- Citizenship
Check your eligibility before applying for the scheme, as there are limited places available.
If you are a low- or middle-income earner in Australia and are eager to purchase your first home, the Home Guarantee Scheme is an excellent way to achieve your property goals.
With greater access to the market, the lower deposit requirement will enable Australians to purchase or build the home of their dreams sooner than they imagined.
DISCLAIMER
The following advice is of a general nature only and intended as a broad guide. The advice should not be regarded as legal, financial or real estate advice. You should make your own inquiries and obtain independent professional advice tailored to your specific circumstances before making any legal, financial or real estate decisions. Click here for full Terms of Use.