Family Home Guarantee Scheme: Key Facts

If your client is a single parent with dependents, they may be eligible to purchase a home with as little as a 2% deposit via the Family Home Guarantee Scheme.

How does it work?

Clients usually need to save a deposit of 20% if they want to borrow to buy a home without needing to pay lenders mortgage insurance (LMI). Under the Family Home Guarantee Scheme (FHG), the Government will provide a limited loan guarantee of up to 18% of the home value. This may enable your client to buy a home with a deposit of only 2% and no LMI will be payable.

What are the key points?

• Clients need to earn less than the income limit and meet other eligibility conditions.
• The purchase price will be capped, depending on the property’s location. 
• Eligible clients need to move into the home as their main residence.
• Your client must not have a spouse or de facto partner. Your client cannot be married, even if legally separated.

Who may be eligible?

To be eligible for the FHG, clients must:

• be an Australian citizen aged 18 years or older
• earn taxable income of $125,000 pa or less, based on the last financial year
• not currently have an interest in any Australian real property, including residential, investment 
  and business property, and
• have either full time or shared care of at least one eligible dependant.

The home can be new or existing. Where both parents have shared custody, both can apply for the FHG provided that the eligibility rules are met individually. 

What lending rules apply?

Clients need to meet lender’s normal credit criteria to ensure they can service a loan of up to 98% and provide evidence they have saved the 2% deposit.

What types of homes can my client buy?

Under the scheme, clients can purchase an eligible residential property which includes:

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

Certain requirements apply depending on the type of property and contract your client is entering.

What are the property price caps?

Caps apply to the purchase price to ensure participation is spread fairly across the country. The capital city price caps will apply to large regional centres with a population over 250,000, namely the Gold Coast, Newcastle and Lake Macquarie, the Sunshine Coast, Illawarra (Wollongong) and Geelong.

What are some issues your client should consider?

While the FHG may help your client buy a home sooner, they need to keep in mind that a smaller deposit means a bigger loan. And a bigger loan means bigger loan repayments, as well as higher total interest payments over the life of the loan. It may be the case that the additional interest payable outweighs the LMI savings. 

Also, if your client has moved out of their home for an extended period and rent the home out, the loan may no longer be guaranteed by the Government. They may need to pay additional fees and charges, as well as LMI, depending on factors such as the value of the home and any outstanding debt at that point in time. 

Which lenders are participating and how do clients apply?

Applications can be made directly via one of the approved lenders or their authorised representative (such as a mortgage broker). The Government has appointed specific lenders to the panel of mortgage lenders able to offer guarantees under the scheme. 

What other assistance programs are available?

The FHG complements (but doesn’t directly interact with) other Government assistance programs. These include the:

• First Home Super Saver Scheme, where clients could save for the deposit on their first home in the concessionally taxed superannuation system (if they have never owned property before)
• First Home Owner Grant, which offsets the effect of Goods and Services Tax on buying or building a home, and
• State and Territory based stamp duty concessions.

What next?

To find out more about the FHG you can visit nhfic.gov.au for more information.

More information

If you have any questions, or would like more information, please contact the IOOF TechConnect team on 1300 650 414.

Disclaimer
The information in this section of the website is intended for financial advisers only and is not to be distributed to clients. It has been prepared on behalf of Australian Executor Trustees Limited ABN 84 007 869 794 AFSL 240023, IOOF Investment Management Limited ABN 53 006 695 021 AFSL 230524, IOOF Investment Services Ltd ABN 80 007 350 405, AFSL 230703 and IOOF Ltd ABN 21 087 649 625 AFSL 230522 based on information that is believed to be accurate and reliable at the time of publication.