Have you been holding out from investing after seeing home prices reach new heights?

You’re not alone and thus changes to the Federal Government’s Home Guarantee scheme have made it all the easier for some buyer groups to purchase a home. In this article, we’re going to unpack the complexities of the scheme, how it applies in different areas of Australia and the steps you can take to apply. 

What is the Home Guarantee Scheme? 

The Home Guarantee Scheme offers potential buyers the opportunity to purchase property with a reduced deposit, as small as 5% for couples and 2% for single parents and it comprises of two categories; the First Home Guarantee (FHBG) - which was previously known as the First Home Loan Deposit Scheme, and the Family Home Guarantee (FHG). In a nutshell, the government supports both first-time buyers and single-parent families by guaranteeing the remaining amount post deposit. The government essentially is your guarantor - making it much less risky for a bank to approve a mortgage. This mitigates the need for borrowers to seek out and pay for lenders' mortgage insurance, potentially saving you thousands of dollars. 

How does it differ from state to state? 

To be part of the scheme, the home must be within a capped dollar limit. As the markets across Australia differ greatly in terms of the average property price, the scheme lays out key ‘territories’ where different caps exist. This categorisation ensures that the buyer is not buying out of reach of their own budget or the current market rates. This updated scheme has seen a shift in valuation caps, making it much more achievable to find a property to purchase that suits your needs. 

Some key increases, as noted by The Adviser include: 

• New South Wales Capital City $800,000 to $900,00 
• Victoria Capital City $700,000 to $800,000 
• Queensland Capital City $600,000 to $700,000

All three markets have seen mass growth in the past two years and it’s great to see this shift reflected in the scheme itself. The Minister for Housing, Minister Homelessness and Minister for Small Business, Julie Collins MP, said that the Labour government are “committed to introducing a suite of policies that will make it easier for Australians to buy a home, and deliver more social and affordable housing.”, as reported by The Adviser.

How do you apply? 

The Federal Government has confirmed that 40,000 spots on the scheme are available - 35,000 for first-time buyers and 5,000 for single parents with dependents. The available places are renewed every financial year making July a prime time to apply. To be considered for the scheme you have to tick a few boxes. Here’s what’s stipulated: 

• Total income of $200,000 or less per household (for a couple) or $125,000 (for a single parent. 
• At least 5% deposit in savings, up to 20%.
• For the first home buyer, you must not have purchased a property in Australia before. 
• Applicants must be Australian citizens. 
• Applicants must be a minimum of 18 years of age. 
• You must move into the home within 6 months - if you leave for another property the scheme will become void. 
• If buying as a couple you must be married or de-facto: you cannot be family or friends. 
• Must be purchasing a property within the capped limit for your region. 

If you meet all of the criteria, you put yourself in line to be accepted into the scheme. However, whilst you might save a lot from not having to fork out for LMI fees, you should also consider having  the following additional expenses  in order prior to settlement  is essential: 

• Stamp duty: this will differ based on the value of the property you purchase. It is a compulsory tax from the government paid additional to the purchase of a home. 
• Transfer duty: fees associated with the transfer of money between lenders, conveyancing etc. 
• Government fees: administration costs. 
• Bank fees: setup and administration costs. 
• Conveyancing fees: legal costs when buying a house. 
• Building/pest fees: if the buyer decides to conduct a building and pest report, additional fees are incurred for this service..

Whether you’re a first-time buyer or a single parent, we encourage you to consider applying for the scheme. With these new amendments in line with the current housing market, the scheme presents a wonderful opportunity to purchase property and start your property/ investment journey. 

If you are seeking strategic mortgage advice or in turn, property investment advice speak to one of our expert team who’s on hand to walk you through the property finance process and we will guide you step-by-step.