Find out how these government schemes could help you buy a home with a low deposit
31 March 2022|3 minute read
A challenge that many aspiring home buyers have is saving up for a deposit. Property prices are high and the cost of living continues to rise, so saving can feel like a very slow process.
As part of the Morrison government’s 2022 Federal Budget, treasurer Josh Frydenberg has announced extensions to certain home buyer schemes and introduced a new regional program.
In this article we’ll explain what schemes fall under the Home Guarantee umbrella, what’s changing and how these schemes will affect home buyers.
The First Home Guarantee (previously known as the First Home Loan Deposit Scheme) will increase to 35,000 places per year, up from 10,000 places in 2021. This scheme helps borrowers with low deposits enter the property market sooner.
As mentioned, saving up for a deposit can take a considerable amount of time. The preferred deposit amount to have saved for a home is 20%.
While some lenders are flexible on this, obtaining a home loan with a deposit under 20% will likely incur Lenders Mortgage Insurance (LMI) charges.
This is yet another cost you would have to consider, on top of other upfront property expenses like:
By the time you’ve saved up a 20% deposit, your dream house may have already been snapped up, or house prices could have risen yet again.
With the First Home Guarantee, eligible first home buyers can buy a home with a deposit as low as 5%.
The government guarantees the remaining 15%, which means that lenders can approve buyers for loans without charging them LMI.
Here are the general requirements for purchasing a home under the guarantee:
The First Home Guarantee allows you to buy any type of residential property, provided it falls under the price cap thresholds for your state/territory (see table below).
This means you could purchase:
Check out the table below or use the postcode search tool to check property price caps in your area.
|State/territory||Capital city/regional centres||Rest of state||Other|
|Jervis Bay Territory & Norfolk Island||-||-||$550,000|
|Christmas Island & Cocos (Keeling) Islands||-||-||$400,000|
The Regional Home Guarantee is a new initiative under the umbrella of Home Guarantee government schemes and will provide 10,000 places to regional home buyers. The program is set to kick off in the 2022-2023 financial year.
This scheme works in the same way as the First Home Guarantee. You can buy a home with a deposit of as little as 5% and the government will guarantee up to 15%.
However, unlike the First Home Guarantee, you don’t have to be a first home buyer to participate in the Regional Home Guarantee scheme. However, you can’t have owned land in the last 5 years.
Regional property markets are booming and this may encourage Aussies to look beyond the cities when considering their next place to live.
The Family Home Guarantee is a scheme designed to support eligible single parents to purchase a home. Like the Regional Home Guarantee, applicants do not have to be first home buyers, they can be previous home owners.
This scheme allows eligible applicants to purchase a home with a deposit of as low as 2%, with the government guaranteeing the remaining 18%.
In the 2021 budget, the government revealed it would offer 10,000 places in this scheme over a four year period, but under the 2022 budget, it’s adding 5,000 additional places per year.
Here are some of the key requirements to apply for the Family Home Guarantee:
Additionally, there are property price thresholds in place. These price caps are the same as the First Home Guarantee – see the table above for more or use the postcode search tool to find out the price threshold for your location.
The extra places in the Family Home Guarantee means that together with the First Home Guarantee and Regional Home Guarantee, there will be a total of 50,000 Home Guarantee places per year.
If you want to learn more about the different schemes or figure out your home loan options, book an appointment with your local Aussie Broker today.