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What the Recent Federal Budget Changes Mean for First Home Buyers

Shot of a young couple using a laptop while working on their home finances.

In the recent federal budget announcement, the Treasurer outlined a number of changes that will affect first home buyers. The government has committed to extending its home ownership support scheme, which will provide 50,000 places across the New Home Guarantee, Family Home Guarantee, First Home Guarantee, and newly established Regional Home Guarantee programs.

In this article, we will take a closer look at these changes and explain what they mean for you. So if you’re thinking of buying your first home in the near future, then make sure you read on!

The First Home Guarantee Scheme, previously known as the First Home Loan Deposit Scheme (FHLDS), has been established to assist eligible first-time buyers with entering the housing market sooner.

So, how does it work for a first-time buyer?

The first thing you need to be aware of is that the government has renamed the program in this year’s budget, changing it to the First Home Guarantee (FHG). It was previously named the First Home Loan Deposit Scheme. So if you are used to looking for FHLDS, then be aware it is now called the First Home Guarantee (FHG).

The First Home Guarantee works by bridging the gap between a first home buyer’s deposit, and the minimum expected deposit amount required by most lenders, which is generally 20% of the property value. With the FHG, first-time homeowners can purchase a residence with a deposit of as low as 5%, and the remaining 15% of the required deposit amount is guaranteed by the government, meaning you get to avoid paying lenders mortgage insurance (LMI) on the loan.

Eligible borrowers may also use the program’s guarantee in conjunction with other government initiatives to help first-time buyers buy a home, including The First Home Super Saver Scheme, stamp duty concessions and/or waivers, and state and territorial first-time home owner grants, so you should speak to your financial expert or mortgage broker to ensure you are taking advantage of all available initiatives.

It is worth noting that under the first home guarantee, funds are not made available as a cash payment or act as a standalone deposit. You still need to provide evidence that you can service the loan with a recognised lender. Read our blog about first home buying.

Help for existing owners looking to move

The newly announced Regional Home Guarantee also includes 10,000 places per year for eligible buyers purchasing a new home in regional Australia, with a deposit of 5% or more. It’s also not limited to just first-home buyers, however, applicants must not have owned a home for at least five years.

Who can access the FHG?

To find out if you are eligible to take advantage, you should speak to a lending expert who can assess your situation and provide you with the appropriate guidance and engage the relevant lenders. However, below is a list of criteria made available to assess your eligibility for this program.

  • First-time home buyers who have not owned or had an interest in a property in Australia previously, either jointly or separately
  • Intends to be owner-occupiers of the purchased property (the scheme excludes investment properties)
  • Australian citizens at least 18 years old (permanent residents are ineligible)
  • Single applicants with an annual taxable income of up to AU$125,000 in the prior financial year and couples with an annual taxable income of up to AU$200,000 for the previous financial year (for applications from July 1, 2021 to June 30, 2022, the relevant financial year assessed will be 2020-21)
  • Couples eligible under the scheme are only those married or in a de-facto relationship (other parties buying jointly, like siblings, parent/child, or friends, are ineligible)

In addition to your personal financial situation, the property must also be recognised as an ‘eligible residential property’ – this term has a specific meaning under this Scheme. Eligible residential properties include:

  • 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 do I apply for the First Home Guarantee?

To apply for the Family Home Guarantee or New Home Guarantee schemes, speak to one of our finance experts at GA Finance to discuss your personal situation, and we can point you in the right direction.

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