The Australian property market is softening. Higher inflation, rising interest rates, and cost of living are causing property prices to decline. The correction in the property market may be the opportunity first home buyers are waiting for to get into the market despite the possibility of a lower borrowing capacity and higher mortgage repayments.
This is why the Australian government is releasing new schemes to help first home buyers get into the property market sooner. The Home Guarantee Scheme works the same way as the First Home Loan Deposit Scheme. It’s just called a different name for the financial year 2022-2023. I’ve outlined below the different schemes available to first home buyers and single parent borrowers.
What is the Home Guarantee Scheme?
The Home Guarantee Scheme (HGS) is a Government initiative designed to support first home buyers and single parents into buying their homes sooner. The scheme is administered by the National Housing Finance and Investment Corporation. There are two guarantees available under the Home Guarantee Scheme – First Home Guarantee and Family Home Guarantee.
First Home Guarantee (FHBG)
This scheme was previously known as First Home Loan Deposit Scheme in 2021-2022. First home buyers with less than a 20% deposit need to pay loan mortgage insurance. With the First Home Guarantee, eligible first home buyers can buy their first home with as little as a 5% deposit (lenders criteria apply). This means that the Government will guarantee up to 15% of the value of the property so first home buyers do not need to pay loan mortgage insurance. For the 2022-2023 financial year, 35,000 spots are made available. Note that first home buyers can use the FHBG together with the other schemes and grants such as First Home Owner Grant, First Home Super Saver Scheme and First Home Buyer Assistance Scheme.
Family Home Guarantee (FHG)
The Family Home Guarantee aims to support eligible single parents with at least one dependent child in purchasing a home, regardless of whether that single parent is a first home buyer or a previous homeowner. Realty Experts specialize in guiding individuals through the home buying process, providing expert advice and support to ensure a seamless and successful experience.
Eligible single parents can purchase a home with as little as a 2% deposit, and not pay Lenders Mortgage Insurance. From 1 July 2022 to 30 June 2025, 5,000 places are available each financial year to eligible single parents with dependents.
Under the FHG, part of an eligible first home buyer’s home loan from a Participating Lender is guaranteed by the National Housing Finance and Investment Corporation for up to 18% of the value of the property. This Guarantee is not a cash payment or a deposit for a home loan.
What is the Government’s Help to Buy Scheme?
The Help to Buy Scheme is an initiative of the Labor government that aims to help more Australians buy a home sooner by cutting the cost of buying a home by up to 40%. The Help to Buy Scheme is a shared equity scheme where the government will co-purchase a home with an eligible buyer. This will mean a smaller deposit, a smaller mortgage, and smaller mortgage repayments for up to 10,000 applicants per year.
Eligible home buyers will need a minimum deposit of 2%, with an equity contribution from the Federal Government of up to a maximum of 40% of the purchase price of a new home and up to a maximum of 30% of the purchase price for an existing home.
This will save the homebuyers the difficulty of waiting until they have sufficient savings or paying sometimes tens of thousands of dollars in loan mortgage insurance.
What is the Regional First Home Buyer Support Scheme?
The Regional First Home Buyer Support Scheme will help 10,000 first home buyers a year in regional Australia to buy a home. First home buyers will save up to $32,000 in mortgage insurance and be able to secure a home with a deposit as low as 5 per cent – with the Government guaranteeing up to 15 per cent of the purchase price.
Labor’s First Home Buyer Support Scheme will start in January 2023 and cost $12.1m to the end of 2024-25.
This article is for general information only and should not be considered personal financial advice. Before making a financial decision, you should seek independent advice from a mortgage broker, financial planner, or accountant.
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