New Home Guarantee

Chris Modderno, Content Writer

Last updated 08 April 2022, 10:52 AM

First Home Buyers may be eligible for the FHLDS (New Home Guarantee). Here we explore the scheme and how first home buyers can purchase a new home on a 5% deposit, subject to being able to service home loan repayments and additional home loan costs.

New Home Guarantee 2022 Update

Please note as announced in the 2022-23 Federal budget the New Home Guarantee will be ending on 30 June 2022 as scheduled.

However, if you are a first home buyer looking to build or purchase a new home, you may still be eligible to receive support to purchase a new home with a lower deposit. This is possible through the 35,000 places made available in the Government’s First Home Guarantee.

What is the new home guarantee?

First announced in the 2021-21 Federal Budget, the Government has allocated an additional 10,000 places to the First Home Loan Deposit Scheme (FHLDS) to the new home guarantee. These 10,000 additional places are known as the First Home Loan Deposit Scheme (New Homes) or FHLDS (New Homes).

Don't miss out, places in the scheme are limited! To find out how you can apply contact your local Mortgage Choice broker today.

Eligibility

The eligibility requirements for the FHLDS (New Homes) are similar to the existing FHLDS that was originally announced in 2019. To be eligible for the FHLDS new home guarantee you will need to meet the following conditions:

Income

You can apply for a place in the new home guarantee if you are a single applicant with a taxable income of no more than $125,000 per year or $200,000 for couples for the previous financial year. For example any applications made to the FHLDS (New Home Guarantee) up to 30 June 2022, the relevant financial year that will be assessed is FY2020-21. To apply for this scheme you will need to provide the relevant Notice of Assessment from the ATO for that previous financial year.

Joint applications

Joint applications will only be eligible for the FHLDS (New Homes) if they are a married couple or in a de-facto relationship. Other types of joint applications - siblings, parent/child, friends, ect - are not eligible.

Ownership

To be eligible for the FHLDS (New home guarantee) scheme, you must be a genuine first home buyer, meaning that you have not previously owned, or had an interest in, any property in Australia. This includes any joint ownership, commercial property, investment property or company title properties.

Citizenship

All applicants must by Australian citizens who are at least 18 years to be eligible for the FHLDS (New Home Guarantee) Scheme.

Owner-occupied

The FHLDS (New home Guarantee) is specifically provided for first home buyers who intend to live in their home. This scheme is not eligible for investment properties and you will need to move into the property within six months of owning your home and continue to live in that property for so long as your home loan has a guarantee under the scheme.

Deposit

The FHLDS (New Home Guarantee) is only available to first home buyers who have at least a 5% deposit. It is designed to help first time buyers enter the market quicker by reducing the need to save a full 20% deposit that is usually required. If you have saved a 20% deposit or more, this scheme will not apply to you as your home loan will not need to be covered.

How does the New Home Guarantee work?

This scheme works to allow eligible first home buyers who are looking to purchase or build a new home to apply for a home loan with a 5% deposit without paying lenders mortgage insurance (LMI).

The FHLDS (New Homes) is administered by the National Housing Finance and Investment Corporation (NHFIC). If you are successfully approved for a place in the new home guarantee the NHFIC will provide a guarantee to the participating lender of up to 15% of the value of the property that is being financed. This allows you, as a first home buyer, to get a home loan using a 5% deposit without incurring the costs of LMI.

It is of course important to understand that owning a home and purchasing a property with a mortgage involves more than the deposit. During the purchase process, extra costs may arise and home buyers will need to factor these into their budget. Extra costs may include pest and building, legal fees and more.

This is where expert advice comes in. Your local Mortgage Choice broker works in your best interest. They can help provide you with approximate costs when it comes to the overall purchase of your home and avoid the shock of any surprises costs later down the track. Read more here on the hidden costs of buying a home.

What Types of Properties are Eligible?

As this scheme is only available to first home buyers that are looking to build or purchase new built properties, there are certain property types that are eligible. However, for all eligible property types, to be eligible for the FHLDS (New Home Guarantee) you will need to enter a contract of sales and/or building contract prior to the expiry of your 90 day pre-approval.

The different types of properties that are eligible include:

Newly-constructed properties

The property has completed construction on or after 1 January 2020 and has not been sold as a residential premises, rented or leased, and never been lived in.

The property may also be eligible if it has been substantially renovated to replace a demolished premises. However, the property will need to be ready for you to move in from settlement, you are ineligible for the New Home Guarantee scheme if you are looking to purchase a property to do you own substantial renovations or for knock down rebuilds.

Off-the-plan dwellings

When entering into a contract of sale and the title of the property has not been issued or the property can’t be legally occupied. To be eligible the contract of sale must be dated on or after 7 October 2020 and you need to move into the property within 6 months of the occupancy certificate being issued.

House and land packages (or Land and separate contract to build a home)

To be eligible for the FHLDS (New Home Guarantee) you must enter into an eligible building contract dated on or after 7 October 2020 to build a new home, start building within 6 months of entering the contract, finish building within 24 months and move into the property within 6 months of the occupancy certificate being issued.

Building contracts

Building contracts must be with a licensed or registered builder and specify a fixed price for the construction of the dwelling.

Find out if you're eligible today.

What are the Price Thresholds by State?

As of the 19th of June 2021 the price thresholds for the New home guarantee scheme is:

Table 1: First home Loan Deposit Scheme (New Home Guarantee) price limits

State/Territory	Capital City/Regional Centre	Rest of state
NSW	$950,000	$600,000
VIC	$850,000	$550,000
QLD	$650,000	$500,000
WA	$550,000	$400,000
SA	$550,000	$400,000
TAS	$550,000	$400,000
ACT	$600,000	N/A
NT	$600,000	N/A

Source: National Housing Finance and Investment Corporation

How to Apply for the New Home Guarantee?

All applications for the FHLDS (New Home Guarantee) need to be made directly with one of the Scheme’s participating lenders or through a mortgage broker. There are currently 27 participating lenders across Australia offering places under the New Home Guarantee.

Contact your local Mortgage Choice broker today to find out if you’re eligible – and to find out which lenders are involved in the scheme.

Property Ownership

This guide outlines the essential steps to achieving property ownership, starting from the first appointment with a mortgage broker all the way to settlement.

Download now

This article was originally published on 06 July 2021, and has since been updated.