The Australian property market is softening. Higher inflation, rising interest rates, and the cost of living are causing property prices to decline. The correction in the property market may be the opportunity first home buyers are waiting for to get into the market despite the possibility of a lower borrowing capacity and higher mortgage repayments.
This is why the Australian government is releasing schemes to help first-home buyers get into the property market sooner. The Home Guarantee Scheme works the same way as the First Home Loan Deposit Scheme. It’s just called a different name starting the financial year in 2022. We’ve outlined below the different schemes available to first-home buyers and single-parent borrowers.
What is the Home Guarantee Scheme?
The Home Guarantee Scheme (HGS) is a government initiative designed to support first-home buyers and single parents in buying their homes sooner. The scheme is administered by the National Housing Finance and Investment Corporation (NHFIC). There are three guarantees available under the Home Guarantee Scheme – First Home Guarantee, Family Home Guarantee, and Regional First Home Buyer Guarantee.
First Home Guarantee Scheme (FHBG)
This scheme was previously known as First Home Loan Deposit Scheme in 2021-2022. First home buyers with less than a 20% deposit need to pay Lenders Mortgage Insurance. With the First Home Guarantee, eligible first-home buyers can buy their first home with as little as a 5% deposit (lenders’ criteria apply). This means that the government will guarantee up to 15% of the value of the property so first-home buyers do not need to pay lenders mortgage insurance. For the 2022-2023 financial year, 35,0000 spots are made available. Note that first-home buyers can use the FHBG together with the other schemes and grants such as FHOG , FHSSS, and FHBAS.
Family Home Guarantee (FHG)
The Family Home Guarantee aims to support eligible single parents with at least one dependent child in purchasing a home, regardless of whether that single parent is a first-home buyer or a previous homeowner. Eligible single parents can purchase a home with as little as a 2% deposit, and not pay Lenders Mortgage Insurance. From 1 July to 30 June 2025, 5,000 places are available each financial year to eligible single parents with dependents.
Under the FHG, part of an eligible first home buyer’s home loan from a Participating Lender is guaranteed by NHFIC for up to 18% of the value of the property. This Guarantee is not a cash payment or a deposit for a home loan.
What is the Regional First Home Buyer Guarantee?
The Regional First Home Buyer Guarantee will help 10,000 first home buyers a year in regional Australia to buy a home. First home buyers will save up to $32,000 in mortgage insurance and be able to secure a home with a deposit as low as 5 per cent – with the government guaranteeing up to 15 per cent of the purchase price.
Changes in the Home Guarantee Scheme
- First Home Guarantee and Regional First Home Buyer Guarantee will now allow joint applications from friends, siblings, and other family members, in addition to couples and single applicants.
- Eligibility for the Family Home Guarantee will be expanded to include single legal guardians such as aunts, uncles, and grandparents, in addition to single natural or adoptive parents with dependents.
- Former property owners will be eligible for both the First Home Guarantee and Regional First Home Buyer Guarantee, as long as they haven’t owned a property in the last 10 years.
- Additionally, eligible permanent residents are now included in the criteria.
What is the Government’s Help to Buy Scheme?
The Help to Buy Scheme is an initiative of the Labor government that aims to help more Australians to buy a home sooner by cutting the cost of a home by up to 40 per cent. The Help to Buy Scheme is a shared equity scheme where the government will co-purchase a home with the eligible buyer. This will mean a smaller deposit, a smaller mortgage, and smaller mortgage repayments for up to 10,000 applicants per year.
Eligible home buyers will need a minimum deposit of 2%, with an equity contribution from the Federal Government of up to a maximum of 40 per cent of the purchase price of a new home and up to a maximum of 30 per cent of the purchase price for an existing home.
This will save would-be homebuyers the dilemma of waiting until they have sufficient savings or paying sometimes tens of thousands of dollars in lenders mortgage insurance.
Watch this to learn more about the government schemes and grants available for first-home buyers.
Maria Papa is a senior property and finance expert specializing in home loans, investment loans, self-employed loans, alt doc loans, car loans, personal loans, and loan protection. She has offices in Sydney, Melbourne, and Manila. If you have questions, you can call Maria at 0430 144 008 or email her at mpapa@maverickfinance.com.au
Your full financial situation will need to be reviewed prior to acceptance of any offer or product.