Purchasing your first house is a significant milestone that frequently involves life-changing decisions and adequate financial preparation. Getting your first home may be daunting, but having the right tools and access to guarantee schemes can help ensure a smooth and manageable first home loan.
We’ll detail the First Home Guarantee Scheme, including its features, advantages, and whether your trusted lender participates. We’ll look at how it can make homeownership easier and offer financial assistance to people just starting out in the real estate market.
How the First Home Guarantee Scheme Works
Formerly known as the First Home Loan Deposit Scheme (FHLDS), the First Home Guarantee Scheme was established to assist qualified first-time homebuyers in purchasing their first house more quickly. When eligible, you can take up a home with a 5% down payment (than the usual 20%) and skip paying Lenders Mortgage Insurance (LMI).
With as little as a 5% deposit, the First Home Guarantee Scheme enables qualified first-time buyers to buy a property for up to a specific amount. Moreover, the National Housing Finance and Investment Corporation (NHFIC) guarantees up to 15% of the value of the asset financed by the participating lender.
Typically, applicants who cannot make the 20% deposit are required to pay an LMI premium to proceed with the loan. This premium can build up to a hefty amount up to tens of thousands of dollars. But if you’re eligible (first home borrower), you can skip LMI entirely and save up a large amount of money.
What are the benefits and disadvantages of FHGS?
For first-time homebuyers, the First Home Guarantee Scheme can have both benefits and disadvantages. Going through these pros and cons can help you decide whether FHGS fits (and helps) your financial objectives and current situation.
FHGS Benefits
- Since the government will be your guarantor, the bank will view your application at a lower risk. Since the NHFIC guarantees the loan, you can then avoid paying thousands of dollars in LMI and giving you access to cheaper interest rates than you may otherwise be able to.
- A 5% deposit is all that you need to crack the real estate market, as opposed to an 8% deposit when paying LMI.
- You could pay rent, but with your own house, regular payments will be applied to your loan account instead, with the expectation of future ownership.
- Additionally, you can combine this new program with existing first-time homebuyer benefits, including stamp duty exemptions, the First Home Owners Grant, and the First Home Super Saver Scheme to increase your savings.
FHGS Disadvantages
- If you purchase a property with a lower deposit, you will borrow a more considerable loan amount and pay more interest.
- The First Home Guarantee Scheme is offered on a first-come, first-served basis, with a limit of 35,000 spots per year. Therefore, you risk missing out if you are not ready to apply before the start date in July.
- Market experts predict these new programs could further increase home prices by excluding prospective purchasers who cannot participate.
Do I Qualify?
Homebuyers who wish to apply for the FHGS must be:
- Applicants and co-applicants must be first home buyers or haven’t purchased another property in Australia in the last ten years.
- Applying for a single application or joint applications
- Applicants must be a citizen or permanent resident of Australia at the time they apply for the loan
- Applicant must be 18 years old or older
- Reflected income on the Notice of Assessment (issued by the Australian Taxation Office) of up to $125,000 for single applicants and $200,000 for combined applicants
- Applicants must intend to occupy the bought property as their primary residence
Access the official Housing Australia Eligibility Tool and answer a quick questionnaire to determine which guarantees you qualify for.
How can I apply?
Only a participating lender and authorised brokers (a mortgage broker) may submit FHGS applications. Talk to our senior mortgage brokers to discover how you qualify and apply for the First Home Guarantee Scheme.
Home purchasers (and those assisting them) should think about speaking with a Participating Lender and getting unbiased financial and legal counsel to determine whether a specific home loan or property and the provisions of the FHGS suit individual circumstances and goals.
Speak with our mortgage brokers at 1300 030 388 and we’ll discuss the possible effects of increasing interest rates or home prices on specific circumstances before engaging in a home loan agreement.
How much deposit do I need?
The minimum deposit required to participate in the program is 5% of the total cost of the property. That means you can still apply for a home loan under FHGS and pay a deposit higher than 5%.
Contact us today and we’ll take you through participating lenders to determine which participating bank/non-bank lender requires genuine savings for a deposit.
Participating Lenders
The NHFIC (now Housing Australia) has approved a panel of 33 participating lenders to offer the program. That includes:
- Commonwealth Bank
- National Australian Bank (NAB)
- The Australian Military Bank
- Bank Australia
- Police Bank
- Regional Australia Bank,
- and Indigenous Business Australia, along with some of the non-major lenders.
For first-time homeowners, the First Home Guarantee Scheme is a guiding light through the confusing maze of property ownership.
Mortgage Pros is here to help as you take that first step. Remember that your dream of homeownership is within reach, and this scheme is here to help you make it a reality.
Contact one of our mortgage brokers at 1300 030 388 or make an online enquiry to discover how you can get closer to your dream home.
FAQs
How many First Home Guarantee slots are available?
The First Home Guarantee Scheme provides qualified candidates with 35,000 slots each year. Additionally, there are 5,000 slots per year under the Family Home Guarantee and 10,000 places per year under the Regional First Home Buyer Guarantee, both valid through June 30, 2025.
What type of deposit is required for the First Home Guarantee?
5% is the minimum deposit required, and 20% is the maximum deposit. Other federal guarantee schemes are available for single parents or legal guardians such as the family home guarantee program, where qualified applicants can proceed with a loan with as little as a 2% deposit.
Is there still a new home guarantee?
There are 35,000 slots available for FY 2023-24. Speak with our senior mortgage brokers today and discover whether you qualify.
