Like millions of Australians, we know that owning your own home is the ultimate dream, but because of the soaring prices of property, it deters many young and low-income families from entering the housing market. Fortunately, there exist programs designed by the Australian government to help eligible families secure their home at an affordable rate and convenient payment plans. One that fits the bill is the Family Home Guarantee, and in this article, we’ll delve if this is the right plan for you!
What is a Family Home Guarantee?
The Family Home Guarantee is a government initiative aimed at assisting low and middle-income families to purchase their first home or a new home. It operates as a part of the broader home loan market, allowing eligible individuals or families to access a home loan with a lower deposit requirement. This scheme is an expansion of the existing First Home Loan Deposit Scheme (FHLDS), which was created to help first-time buyers enter the property market.
What are its Eligibility Requirements?
To ascertain if you can avail of the Family Home Guarantee, you must meet the following eligibility criteria:
- INCOME. Applicants must have an annual taxable income of 125,000 and below. Please note that the income thresholds vary depending on the location of the property. For example, there are higher income thresholds imposed for properties in more expensive cities like Sydney, Brisbane, and Melbourne.
- CITIZENSHIP. The Family Home Guarantee is only extended to either Australian citizens or permanent residents.
- AGE ELIGIBILITY. Applicants must be at least 18 years of age. Specifically, a single parent or a legal guardian of at least one dependent.
- FIRST OR NEW HOME OCCUPIER. This scheme is for first time home owners or citizens who need to buy a new home. The applicant must intend to occupy the property, and not use it to lease or invest it for commercial purposes.
- DEPOSIT AND LOAN CAP. For this loan, borrowers are required to place a deposit of at least 2%, with the government guaranteeing the remaining portion of up to 18% of the property’s value. Additionally, it’s important to check the current price cap per region as it differs from area to area. The maximum property purchase price under FHG is subject to regional price caps, which are adjusted annually.
Pros of using Family Home Guarantee
The most attractive feature of FHG is the lower deposit requirement. This makes homeownership more accessible to smaller families who will otherwise struggle to make an initial deposit. It also helps that the government guarantees a substantial portion of the loan, which allows the applicant to avoid paying Lenders Mortgage Insurance (LMI), a typical requirement when borrowing with a deposit of less than 20%.
Availing of a family home guarantee, especially if you’re eligible for this benefit, allows you to make a positive impact on future generations. As a parent or a legal guardian, we need to provide a stable and nurturing environment where our children can be safe, grow up, and unleash their potential.
Cons of using Family Home Guarantee
On the flipside, you may discover disadvantages to borrowing using the Family Home Guarantee. For example, The price caps imposed on properties eligible for the Family Home Guarantee may limit the choice of homes available to applicants, particularly in high-demand areas. Income-wise, some families may find it challenging to qualify for the scheme as they may not meet the income threshold for their desired location.
Furthermore, because of the reduced deposit requirement, the drawback is that the applicant will take on a larger mortgage – a financial risk/burden that’s hard to manage in the long term.
Now that you know what the Family Home Guarantee is, its eligibility requirements, and the pros and cons of availing of the scheme, you are in a better position to weigh your decision carefully. If in the end you choose to borrow using this assistance, we hope that it will be a solid stepping stone for you to achieve your dream of owning a house in the near future!