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Are you finding it hard to save for a deposit?

Here are two schemes offered by the National Housing and Finance Investment Corporation.

What is the Home Guarantee Scheme?

The Home Guarantee Scheme (HGS) is an Australian government initiative to support eligible home buyers in buying a home sooner. The Scheme is administered by the National Housing Finance and Investment Corporation (NHFIC) on behalf of the Australian Government.

The Scheme includes two types of Guarantees:

First Home Guarantee (FHBG) – supporting eligible home buyers to buy a home sooner, with a deposit of as little as 5%. For FY2023-24, 35,000 places are available.

Family Home Guarantee (FHG) – supporting eligible single parents and eligible single legal guardians of at least one dependent to buy a home sooner, with a deposit of as little as 2%. For FY2023-24, 5,000 places are available.

How it works?

NHFIC works with Participating Lenders to facilitate loans to eligible home buyers who meet income eligibility thresholds and other eligibility criteria and don’t have the 20% deposit typically required for a home loan.

Eligible home buyers can apply for a loan through a participating lender that NHFIC has authorised to participate in the HGS.

NHFIC provides a Guarantee to the Participating Lender of up to 15% of the value of a home loan under the First Home Guarantee or the Regional First Home Buyer Guarantee and up to 18% under the Family Home Guarantee. This lets the buyer buy a home without paying Lenders’ Mortgage Insurance. The Guarantee is not a cash payment or a deposit for a home loan.

Participating lenders

https://www.nhfic.gov.au/participating-lenders

Eligibility criteria

Home buyers must meet certain eligibility criteria for the FHBG.

First Home Buyers Guarantee (FHBG) – Eligibility Criteria

To apply for the FHBG, home buyers must be:

  • applying as an individual or two joint applicants
  • an Australian citizen(s) or permanent resident(s) at the time they enter the loan
  • at least 18 years of age
  • earning up to $125,000 for individuals or $200,000 for joint applicants, as shown on the Notice of Assessment (issued by the Australian Taxation Office)
  • intending to be owner-occupiers of the purchased property
  • First-home buyers or previous homeowners who haven’t owned a property in Australia in the past ten years.

Family Home Guarantee (FHG) – Eligibility Criteria

To apply for the FHG, home buyers must be:

  • applying as an individual
  • a single parent or single legal guardian of at least one dependent (see Eligible Single Parent and Eligible Single Legal Guardian note below)
  • an Australian citizen or permanent resident at the time they enter the loan
  • at least 18 years of age
  • earning no more than $125,000 per year
  • intending to be the owner-occupier of the purchased property
  • NOT currently owning property, or upon settlement of the guaranteed property they’re buying, not intending to hold a separate property.
  • Be single. A person is considered single if they don’t have a spouse and a de facto partner. Note: a person who is separated but not divorced is not regarded as single
  • and has at least one dependent. To have a dependent, they must be the natural parent, adoptive parent or legal guardian of:
    • A “dependent child” within the meaning of subsections (2), (3), (4), (5), (6) and (7) of section 5 of the Social Security Act 1991; or
    • A person receiving a disability support pension within the meaning of the Social Security Act 1991 who lives with you.
  • They must show that they are legally responsible (alone or jointly with another person) for the dependent and the dependent’s day-to-day care, welfare, and development.

FHG applicants can be either first-home buyers or previous homeowners who do not intend to own a separate property upon settlement of the guaranteed property they’re buying.

Property type and price caps

Under the HGS, home buyers can buy a residential property, including:

  • an existing house, townhouse, or apartment
  • a house and land package
  • land and a separate contract to build a home
  • an off-the-plan apartment or townhouse.

How to apply

HGS applications can only be made with a Participating Lender or their authorised representative (a mortgage broker). NHFIC does not accept HGS applications or provide personal financial advice.

Things to consider

When applying for a home loan, your income level and monthly living expenditure are the two most important factors. Lenders will review your bank statements to understand your spending habits and use this information to assess your ability to repay the loan. If there is no surplus after your monthly expenses are deducted from your income, the lender will likely determine that the bank will assess you are unable to service the loan.

Here is a more detailed explanation of the factors that lenders consider when assessing a home loan application:

  • Income: Lenders will want to see that you have a steady income sufficient to cover your monthly expenses and the additional monthly mortgage payments.
  • Expenses: Lenders will review your bank statements to understand your spending habits. They will look for any signs of excessive spending, such as large credit card bills or frequent cash withdrawals.
  • Debt-to-income ratio (DTI): Lenders will calculate your DTI ratio, the percentage of your monthly income that goes towards debt payments. A high DTI ratio can make it more challenging to get a loan.
  • Credit score: Lenders will also look at your credit score, which measures your credit history. A good credit score will make you a more attractive borrower.

If you are considering applying for a home loan, carefully considering your income level and monthly expenses is essential. You should also make sure that you have a good credit score. Doing these things increases your chances of getting approved for a loan and getting the best possible terms.

 

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