Saving for a deposit is often the biggest barrier aspiring homeowners face as the amount – typically pegged at 20% of the property’s value – can easily top six figures, especially with the current surge in home prices. This is especially difficult for single-income households.
This is what the government’s latest state-based incentive is trying to address. Family Home Guarantee was launched at the start the month and aims to support single parents in realizing their homeownership dreams, even with a modest deposit.
This is all you need to know about the new initiative.
How does the First Home Guarantee program work?
Single parents can apply for a mortgage with a Family Home Guarantee, even with a 2% deposit. This helps them get on the property ladder faster.
Over four financial years, there are 10,000 available spots or until 30 June 2025. This program is available to first-time homebuyers as well as single parents who are looking to reenter the housing market.
The scheme is administered on behalf the Australian government by the National Housing Finance and Investment Corporation. The NHFIC guarantees home loans taken out under the initiative for home buyers with between 2% and 20% deposits, allowing them to avoid paying lenders’ mortgage insurance (LMI).
Both the mother and father may be eligible for the incentive depending on their custody arrangements and circumstances. Single parents have the option to either buy an existing house or build one. However, the initiative is not available to invest in properties.
What are the eligibility criteria?
The NHFIC published a fact sheetThis document outlines the eligibility requirements for those who wish to apply for First Home Guarantee. The applicant must be:
- Be a single parent, with at least one dependent
- At least 18 years old and a citizen of Australia
- Demonstrate they are legally responsible to provide care, welfare, and development for the child.
- An annual taxable income less than $125,000 from the previous year (excluding child support payments)
- Be the sole applicant for the loan and certificate title
- Live in the house they are planning to buy
- Do not own an interest or ownership in freehold properties in Australia. This includes commercial and investment properties as well as land.
Learn more: Do single parents qualify for the home loan scheme for single parents?
What kind of properties can you buy?
Like the First Home Loan Deposit Scheme FHLDS, the Family Home Guarantee program allows only the purchase of residential property. Investment properties are not covered. The following properties are eligible:
- Apartment, townhouse or house in progress
- House and Land Package
- To build a home, you will need land and a contract
- Apartment unit or townhouse off-the plan
A similarity to FHLDS is also the price threshold for the properties. Below is a table that details each territory and state’s price caps.
|
Established property |
Built or new home |
Established property |
Built or new home |
|
|
New South Wales |
$800,000 |
$950,000 |
$600,000 |
$600,000 |
|
Victoria |
$700,000 |
$850,000 |
$500,000 |
$550,000 |
|
Queensland |
$600,000 |
$650,000 |
$450,000 |
$500,000 |
|
Western Australia |
$500,000 |
$550,000 |
$400,000 |
$400,000 |
|
South Australia |
$500,000 |
$550,000 |
$350,000 |
$400,000 |
|
Tasmania |
$500,000 |
$550,000 |
$300,000 |
$400,000 |
|
Australian Capital Territory |
$500,000 |
$600,000 |
N/A |
N/A |
|
Northern Territory |
$500,000 |
$550,000 |
N/A |
N/A |
How do you apply for the scheme
Eligible single parents must apply for the Family Home guarantee through around 30 participating lenders. These lenders are similar to those in FHLDS. NHFIC states that it does NOT accept, evaluate, or approve applications nor maintain waitlists to place applicants in the program.
For applicants for positions from 1 July 2021 through 30 June 2022, they will need to submit a notice to assess their tax returns for the previous financial year to the Australian Taxation Office.
Participants lenders were allowed to process applicants up to the preapproval stage without notice of assessment. However, the NHFIC recommends that applicants discuss the risks involved in signing a contract before they obtain a notice.
The Family Home guarantee can be used in conjunction with other state incentives like the First Home Owner Grant and First Home Super Saver. It cannot be used in conjunction with FHLDS, as they serve the same purpose: to help buyers with low deposits.
Here is list the participating lenders in the government’s Family Home Guarantee scheme.
- Australian Military Bank
- Bank Australia
- Bank First
- Bank of Heritage Isle
- Bank of Us
- Bendigo Bank
- Border Bank
- Commonwealth Bank
- Community First Credit Union
- Defence Bank
- Firefighters Mutual Bank
- G&C Mutual Bank
- Gateway Bank
- Health Professionals Bank
- Indigenous Business Australia
- MyStateBank
- NAB
- Police Bank
- Q Bank
- Regional Australia Bank
- Teachers Mutual Bank
- The Mutual Bank
- UniBank
- WAW
Continue reading: How to apply in the Single Parent Home Loan Scheme
What are the pros & cons of First Home Guarantee?
Family Home Guarantee has the primary benefit that single parents can buy a home without paying LMI. It allows them to move up the property ladder quicker by allowing them to make a small deposit. This is especially important given the fact that property prices are likely to rise further in future. Single parents can also use the money they would otherwise spend on rent to pay their mortgage by owning their home.
The cost of buying a property is not just the 2% deposit. Homeownership comes with additional expenses. It is important to note that even though the government guarantees 18% of the loan amount it does not guarantee that they will actually pay for it. This amount will be added to the loan for single parents.
It is best to talk with a professional mortgage broker before applying for a loan. A professional broker can help you assess your financial situation and make informed buying decisions.
