30,000 new spots available in home loan deposit schemes

Tens of thousands of first-home buyers and single parents will get a leg-up onto the property ladder with the release of 30,000 new places available under the federal government’s First Home Loan Deposit Scheme, New Home Guarantee, and Family Home Guarantee.

30,000 new places have been released under First Home Loan Deposit Scheme, New Home Guarantee, and Family Home Guarantee.

From July 1, new property price caps will also apply to ensure more people can access the program as home values surge.

Here’s what the changes mean:

First Home Loan Deposit Scheme
New Home Guarantee
Family Home Guarantee

First Home Loan Deposit Scheme

10,000 new places in the First Home Loan Deposit scheme (FHLDS) were released on 1 July 2021.

The FHLDS allows eligible first home buyers to purchase a property with as little as a five per cent deposit and without the need to take out lenders mortgage insurance (LMI).

Unlike the New Home Guarantee, it applies to the purchase of both new and existing homes.

How it works:

The Commonwealth Government guarantees the difference between what the eligible first home buyer has saved, and the 20% deposit threshold (plus costs) lenders usually require before they’ll provide a loan without LMI.

For example:

An eligible buyer has a 5% deposit, or $25,000, to put towards a $500,000 home.

Under the scheme, the government will guarantee the first $75,000 of your loan to bring your security up to 20%, or $100,000, of the total value of the property.

Remember, there are other upfront costs you need to factor in on top of the deposit, such as stamp duty and conveyancing fees.

Price caps for the First Home Loan Deposit Scheme (FHLDS):

For the purposes of the scheme, a regional centre includes any centre with a population greater than 250,000. This includes the Gold Coast, the Sunshine Coast, Newcastle and Lake Macquarie, the Illawarra and Geelong. Some other regions have different thresholds.

New Home Guarantee

The economic downturn caused by COVID-19 prompted the government to extend the original FHLDS scheme to help first-home buyers building or purchasing new homes, with 10,000 new places initially made available in the 2020/21 financial year.

This temporary expansion of the FHLDS, called the New Home Guarantee, has been extended for a second year with an additional 10,000 new places released from July 2021.

Limited to new homes only, the New Home Guarantee was designed to stimulate construction activity during the economic uncertainty.

What is classed as a ‘new home’?

Eligible properties include:

• newly constructed dwellings (e.g. whether a freestanding house, townhouse or apartment)
• off-the-plan dwellings (e.g. whether a freestanding house, townhouse or apartment)
• house and land packages
• land and a separate contract to build a new home.

Who is eligible:

To be eligible for either the FHLDS or the New Home Guarantee:

• You must be an Australian citizen who’s over 18 years old.
• You must buy the property to live in it, investment properties are not supported by the Scheme.
• If buying as a couple, it must be with your spouse or partner.
• Single applicants need to have earned $125,000 or less in the last financial year, or a combined taxable income of less than $200,000 for couples.
• You must also never have owned residential property previously in Australia.

If you are building a new home:

• You must enter into an eligible building contract within 90 days of being pre-approved
• You must start building within 12 months of entering into the eligible building contract and finish building within 24 months of starting.

Price caps for the New Home Guarantee:

Family Home Guarantee

From 1 July 2021, 10,000 Family Home Guarantees are available over four financial years for eligible single parents.

The scheme, which was unveiled in this year’s federal budget, allows single parents with dependent children to buy a property with a deposit of as little as 2%, plus costs, subject to their ability to service a loan, with the government acting as a guarantor for the loan.

Who is eligible for the Family Home Guarantee:

Single parents who earned less than $125,000 in the previous financial year, excluding child support payments, may be eligible.

While it’s not limited to first-home buyers, applicants may not currently own a property.

Recipients must also be an Australian citizen who is at least 18 years of age.

It’s estimated 125,000 people could be eligible, mostly women.

Example:

A single parent hoping to purchase a $460,000 home would typically need to save a 20% deposit of $92,000 to avoid paying Lenders Mortgage Insurance.

Under the Family Home Guarantee, and on the success of their application with a lender, they could secure the property with a 2% deposit of $9,200, on top of other upfront costs.

Price caps for the Family Home Guarantee:

How to apply:

Applications for the three schemes can be made through participating lenders or mortgage brokers.

A full list of participating lenders can be found on the National Housing Finance and Investment Corporation’s (NHFIC) website.

Speak to your Mortgage Choice broker to find out what options are available to you.