All You Need to Know About the First Home Guarantee Scheme

For many Aussies, buying a home is like checking off a mega dream from their ultimate bucket list!

However, the process of owning a home can be daunting and stressful, especially for first-time home buyers.

That’s where the First Home Guarantee scheme comes in!

The Australian government has taken a proactive step to make homeownership more accessible to eligible first-time buyers. They have introduced the First Home Guarantee scheme, allowing first-time buyers to enter the market with a deposit as low as 5%, and without the need for Lenders’ Mortgage Insurance (LMI).

However, in order to leverage this scheme to its full potential, you should be aware of its eligibility criteria and application process.

In this blog post, we will explore all about the First Home Guarantee scheme, its benefits, and eligibility checklist by the Australian government.

Let’s dive right in!

Meet – First Home Guarantee Scheme (FHBG)

The Australian government implemented the First Home Guarantee (FHBG) program to support individuals who are buying a home for the first time to enter the property market. It is administered by the National Housing Finance and Investment Corporation (NHFIC) and comes under the Home Guarantee Scheme of the Australian Government.

The First Home Guarantee scheme covers up to 15% of the property’s assessed value by the lender, and is not a cash payment or a deposit for the home loan. It reduces the lender’s risk and allows first-time buyers to secure a loan with a smaller deposit, making homeownership more achievable.

Benefits of the First Home Guarantee Scheme

If you’re a first-time homebuyer, you may be entitled to exemptions, concessions, and grants to simplify the purchase of your first home. The type of property you can buy as your first home is not limited to just a house but also includes newly constructed or substantially renovated townhouses, apartments, units, and properties purchased off the plan.

Here are the top benefits of the First Home Guarantee scheme for first-time home buyers.

Lower Deposit Requirements

Buyers who meet the criteria can buy a property by making a deposit as low as 5%. This means that first-time buyers do not have to save up for a large deposit, which can take years, and can enter the property market earlier. However, it is important to note that a higher deposit may be required to secure a more competitive interest rate.

Reduced Upfront Costs

The scheme removes the need for lenders’ mortgage insurance, which can save buyers thousands of dollars in upfront costs. Typically, lenders require borrowers to take out mortgage insurance if the deposit is less than 20% of the property’s value. With the First Home Guarantee scheme, first-time buyers can save money and reduce the burden of upfront costs.

Lesser Mortgage Repayments

Eligible buyers may be able to avoid paying mortgage insurance premiums, which can be a significant expense, and therefore reduce the cost of repayments. Mortgage insurance premiums can add up to thousands of dollars over the life of the loan, so avoiding this cost can make a significant difference in the affordability of a property.

Eligibility Criteria for the First Home Guarantee Scheme

You can submit your application either as an individual or as a couple (married / de facto).

Additionally, to meet the eligibility criteria as a first-time homebuyer, you need to buy a property in Australia that neither you nor your spouse has previously owned or co-owned, with certain exceptions. And, you must occupy the property within a year of purchase and maintain continuous residence there for at least six months.

Moreover, you are eligible if you:

• Are an Australian citizen or a permanent citizen of Australia.
• Are at least 18 years of age.
• Earn up to $125,000 per annum as an individual or up to $200,000 per annum as a couple, as per the Notice of Assessment issued by the Australian Taxation Office.
• Intend to utilize the purchased property as your primary residence.

Things to Keep In Mind While Applying for the First Home Guarantee Scheme

The Australian government has announced exciting updates to the First Home Guarantee scheme, as part of the 2022-23 Federal Budget. The scheme, which was previously known as the First Home Loan Deposit scheme, has been expanded to make it more adaptable for first-time buyers.

From 1 July 2022 to 30 June 2025, the scheme will offer 35,000 spots for eligible buyers. This increase is part of the government’s plan to help more Australians achieve their dream of homeownership.

Check out the important things to keep in mind while applying for the First Home Guarantee Scheme.

• To apply for FHGS, contact a Participating Lender or their authorized representative.
• NHFIC does not accept FHGS applications nor provide personal financial advice.
• It is recommended to seek independent financial and legal advice to determine whether FHGS is suitable for your personal circumstances and objectives.
• Before signing a home loan agreement, it is essential to discuss potential implications of changing interest rates or house prices with the lender or broker.
• While there are no costs or repayments associated with the FHGS, first home buyers are responsible for all related costs and repayments of the home loan.
• Note that NHFIC does not accept direct applications nor maintain a waiting list for FHGS places.

Wrapping Up

The First Home Guarantee scheme is a valuable tool that has helped many first-time buyers achieve their dream of homeownership. With the recent updates announced by the government, the scheme is set to become even more approachable, offering more opportunities for buyers to enter the market. If you are a first-time home buyer, it’s worth considering the First Home Guarantee scheme to see if you meet the eligibility criteria and can benefit from the lower deposit requirements, reduced upfront costs, and lower mortgage repayments.

Want to Know More About the First Home Guarantee Scheme? Talk to Us!

If you’re looking for more such schemes that can benefit you, just write to Nanak Accountants & Associates at info@nanakaccountants.com.au, and we’ll take it from there!