The Family Home Guarantee Scheme is an Australian Government initiative announced in the 2021 federal budget to assist single parents enter the property market with a deposit as low as 2% and avoid paying lenders mortgage insurance.
The Scheme will commence on 1 July 2021 and will be limited to support 10,000 loans over a four year period. Applications will not be available until the scheme commencement on 1 July 2021.
How does it work?
Generally most lenders require anyone purchasing a property to have a minimum deposit of 5% of the purchase price, however they do charge Lenders Mortgage Insurance (LMI) to the customer which can run into the tens of thousands of dollars. Usually the only way to avoid LMI is to have a minimum deposit of 20% which can be extremely difficult for home buyers. This new scheme will guarantee the single parents’ loan for the outstanding 18% so no LMI is charged.
From 1 July 2021 an Assured Lending Mortgage Broker can apply for the Family Home Guarantee scheme on behalf of eligible single parents with one of the approved panel of lenders. Not every Lender will be approved for the Family Home Guarantee Scheme so it’s important to speak with your Mortgage Broker about eligible loan options that best suit your needs.
Eligibility criteria for the family home guarantee scheme?
- Must be an Australian citizen over 18 years of age.
- Maximum annual taxable income of $125,000 for the previous financial year (not including child support payments)
- Must be a single parent with at least one natural or adoptive dependant child under the age of 18 years.
- Single parent must show they are legally responsible for the day-to-day care, welfare and development of the child who is in their care. Depending on the terms of any shared custody arrangement, this may enable both individuals in a former couple to separately access the Family Home Guarantee
- Eligible to purchase a new or existing owner occupied property with principal and interest repayments.
- Home loan must be taken from an approved Family Home Guarantee Scheme lender.
- Loan repayments must be principal and interest
- Must have genuine savings of 2% of the property value.
- Maximum property purchase prices as per table below.
- Single parent must be the only name listed on the certificate of title
- Applicants can be either first home buyers or previous owner-occupiers who do not currently own a home
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In addition to the Family Home Guarantee Scheme, the Government also confirmed the following schemes to boost the housing market in the 2021 financial year:
- Expand the New Home First Home Loan Deposit Scheme by another 10,000 places in 2021-2022 to First Home Buyers seeking to build a new home or purchase a newly built home with a deposit of at least 5 per cent.
- Continue the First Home Loan Deposit Scheme (FHLDS); which will provide 10,000 places in 2021-22 to First Home Buyers seeking to purchase an existing home with a deposit of at least 5 per cent.
- Increase the maximum amount of voluntary contributions that can be released under the First Home Super Saver Scheme (FHSSS) from $30,000 to $50,000.
- Provide $124.7 million in funding to enable the states and territories to “bolster public housing stocks”, or to meet their social and community housing responsibilities.
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