Buy your First Home Soon with the New Home Guarantee Scheme

Buying a house in Australia shall be your dream, and the latest Federal Budget can make your dream come true. It is possible because of the FHLDS new home guarantee. The First Home Loan Deposit Scheme 2022 has been expanded and rebadged as the Home Guarantee Scheme. The new scheme allows the eligible first home buyers to enter the market to fulfill their dream of buying a house. One of the great attractions of the new scheme is that it does not have LMI (lenders mortgage insurance), and first home buyers can get into the market with only a 5% deposit.

Fulfill your Homeownership Goal with the Home Guarantee Scheme

Many people find it challenging to save a deposit for their first home. But more first home buyers can fulfill their homeownership goals because of the first home guarantee scheme of the Australian government. The government has announced an additional ten thousand New Home Guarantee places for the benefit of first home buyers. They can either purchase or build to fulfill their homeownership goal.

The New Home Guarantee Scheme

The Australian Government comes with an initiative for supporting eligible first home buyers with their new home guarantee scheme. The eligible first home buyers can buy their first home sooner through this scheme. This scheme has been extended with additional ten thousand places, and you can enjoy its benefits from 1st July 2021 to 30th June 2022.

An attractive feature of the new scheme is that the NHFIC guarantees a part of the home loan from a participating lender of the eligible first-time homebuyer. It enables buyers to purchase their first home soon with only a 5% deposit. Usually, first-time home buyers need to deposit approximately 20% in order to pay as Lenders Mortgage Insurance.

Why it is Great News for you

Usually, you need to save at least 20% of the property value to secure a home loan if you plan to buy a property. Besides, saving this much amount is necessary to avoid paying Low Deposit Premium or Lenders Mortgage Insurance. It also requires if you want to avoid relying on a guarantor to buy the home. Under the first home loan deposit scheme 2022, you need to pay only a minimum of 5% of the property value towards the deposit. At the same time, the NHFIC provides a guarantee to the lender to cover up to 15% of the value of the property. That means you can purchase your first home with a deposit of as little as 5%.

Eligibility to Apply for the First Home Loan Deposit Scheme

For applying for the first home loan deposit scheme, you must fulfill the following eligibility criteria:

  • You must be an Australian citizen of at least 18 years of age.
  • You are not a permanent resident of the country.
  • Applicants had not any interest in a residential property or previously owned one. They do not own it jointly or separately with someone else.
  • If you are single, your taxable income should not be more than $125,000 per annum, and the combined taxable income should not be more than $200,000 in the case of couples.
  • Married couples or those in a de facto relationship are only eligible for the first home guarantee scheme. No other two people can buy property under this scheme, including parent/child, siblings, or friends.
  • Applicants of this new home loan deposit scheme must have a minimum deposit of 5% of the property value.
  • The maximum price of the property purchase is subject to the suburb and postcode of the new property.

Are you Eligible for the New Home Guarantee?

Checking your potential eligibility for the new home guarantee scheme is vital before you apply for the same. In addition to the eligibility requirements for the first home loan deposit scheme, the following conditions also apply to it.

Applicants of this scheme should purchase or build a new home including:

  • House and land packages
  • Newly constructed dwellings
  • Off-the-plan dwellings
  • Land and a contract to build a new house

How does the New Home Guarantee Scheme Work?

First-time home buyers will get faster and easier access to the property market with the new home guarantee scheme of the Australian government. They can buy their first home while avoiding Lenders Mortgage Insurance. Since the government underwrites the loan, borrowers do not need to pay LMI. You can apply for the scheme and demonstrate your eligibility through a participating lender or an authorized representative like LoanPost a Mortgage broker. If your application is approved, you will be taken out with a lender for a home loan. In this case, the government will act as your guarantor.

Usually, the home loan applicant must pay a deposit of less than 20% and LMI if the lender approves a loan. Since the Australian Government acts as the guarantor under this scheme, the borrower need not pay the insurance. It will be a boon for the borrower as the LMI can be expensive depending on the loan size and deposit and the terms as per the lender.

Those who take out a loan under the home guarantee scheme will receive support till the balance of their loan gets reduced below 80% of the value of the property they purchase. But, they will no longer be eligible to get the support if they refinance their home loan, move out or sell their home. If you own more than 80% of the property value in the case of refinancing, you need to pay the fees for LMI with your new lender.