First Home Deposit Scheme Expanded

The Australian government has released its federal budget for 2022-2023, and there are several changes that could benefit home buyers. This includes an expansion of the Home Guarantee Scheme that seeks to help first-time buyers get into the housing market. Here is a breakdown of the key changes that may impact you!

Home Guarantee Scheme

The Australian government launched the Home Guarantee scheme several years ago to help first home buyers break into the property market. During the federal budget announcement, Treasurer Josh Frydenberg revealed that the government will be expanding the scheme to support Australians looking to buy a home with a deposit of less than 20%. For those who successfully apply, the government guarantees up to 15% of the value of a home that a borrower purchases, meaning you may be able to secure a loan with just a 5% deposit.

Previously the scheme was capped at 10,000 places, with last year’s scheme running until 30 June 2022. The Federal Government announced that the 2022-23 scheme will expand the number of places from 10,000 to 35,000 places, plus an additional 10,000 places for home buyers in regional areas.

Here is a basic breakdown of the expanded scheme announced in the 2022 Federal Budget, which has within it three separate schemes:

• 35,000 places to first home buyers looking to purchase a new or existing home (known as the First Home Loan Deposit Scheme).
• 10,000 places for first home buyers and previous homeowners in regional Australia (which will be known as the Regional Home Guarantee).
• 5000 places per year for single parents looking to purchase their first home or re-enter the property market (which will be known as the Family Home Guarantee).

For both the First Home Loan Deposit and the Rural Home Guarantee Schemes, despite the fact that you may only need a 5% deposit to be eligible, in some circumstances you might still have to pay some government fees, such as stamp duty. By chatting to a mortgage broker, they can advise you on what the likely fees would be, which is crucial in ensuring you have enough money upfront to have your application approved. 

Overview of the scheme currently:

As mentioned, under the scheme there are three separate categories that the Federal Government is supporting:

1. For a property to be eligible it must be a ‘residential property’ – this term has a particular meaning under each of the Schemes, and Participating Lenders can assist if there is any doubt.
2. Couples are only eligible for the First Home Loan Deposit Scheme or the New Home Guarantee if they are married or in a de-facto relationship with each other. Other persons buying together, including siblings, parent/child or friends, are not eligible for these Schemes. 
3. Applicants can be either first home buyers or previous owners who do not currently own a home. That is, the applicant must not currently have a freehold interest in real property in Australia, a lease of land in Australia or a company title interest in land in Australia. 

Eligibility:

There are numerous criteria for an applicant to be eligible, which you can find out here, but to be eligible for the scheme, but the main criteria for eligibility are:

• Australian citizens who are at least 18 years of age. 
• Single applicants with a taxable income of up to $125,000 per annum for the previous financial year and couples with a taxable income of up to $200,000 per annum for the previous financial year.
• Couples are only eligible for FHLDS if they are married or in a de-facto relationship with each other. Other persons buying together, including siblings, parent/child or friends, are not eligible for the Scheme.
• FHLDS assists single (individual) applicants and couples (together) who have at least 5 per cent of the value of an eligible property saved as a deposit. If 20 per cent or more is saved, then the home loan will not be covered by the Scheme.
• Applicants must intend to be owner-occupiers of the purchased property. Investment properties are not supported by FHLDS.

Price Caps on Properties:

The Scheme is targeted to assist borrowers in the purchase or construction of new homes, and therefore the value of the property that a borrower seeks to purchase with the assistance of the Scheme has certain thresholds depending on your location. Changes to the price caps for each particular area have just been announced, and are set to come into effect on 1 July 2022:

* The capital city price thresholds apply to regional centres with a population over 250,000 (Newcastle & Lake Macquarie, Illawarra (Wollongong), Geelong, Gold Coast and Sunshine Coast), recognising that dwellings in regional centres can be significantly more expensive than other regional areas.

How to apply?

The scheme is administered by the National Housing Finance Corporation (NHFIC), but all applications for any parts of the Scheme must be made directly to one of the 33 Participating Lenders. It’s in your best interests to engage a mortgage broker for this process, as they can analyse which lenders may have exhausted their allocation of places for the scheme and save you wasting time applying directly to lenders who may not be able to meet your needs. 

Whilst the number of places available in the scheme has been expanded, some experts are predicting that demand will still substantially out-strip supply. 

It’s important to remember that applying for these schemes via a well connected and experienced broker will help you track down a lender who has available places.

So, if you think the expanded scheme might be right for you, reach out to one of our experienced YBR Brokers today to discuss your circumstances!