Buying your first home has always been a milestone achievement, but in today’s market, it feels more like an uphill battle.
The dream of homeownership is becoming increasingly difficult to achieve, especially with rising property prices and the need for a substantial deposit.
While previous generations dealt with higher interest rates, the challenge for today’s home buyers is saving enough to get a foot on the property ladder in the first place.
However, there’s hope on the horizon with the Family Home Guarantee, an initiative that allows eligible buyers to secure a home with as little as a 2% deposit.
Understanding the 2% deposit option
The Australian government created the Family Home Guarantee to help single parents or guardians with dependent children purchase a home with a minimal deposit.
Home buyers who have less than a 20% deposit usually pay Lenders Mortgage Insurance (LMI), which adds thousands of dollars to the cost of buying a home.
However, under the Family Home Guarantee, if you can provide a 2% deposit, the government will guarantee up to 18% of the property’s value, allowing you to avoid paying LMI.
This scheme is a game-changer for those struggling to save a large deposit, providing a pathway to homeownership that might otherwise seem out of reach.
Eligibility criteria for the Family Home Guarantee
To qualify for the Family Home Guarantee, applicants must meet specific eligibility criteria:
- You must be 18 years of age or older.
- The applicant must be an Australian citizen.
- Only single applicants are accepted, and you must be a single parent or legal guardian of at least one dependent child.
- Your taxable income must not exceed $125,000 per year, excluding child support payments.
- The scheme is not limited to first-home buyers; however, you cannot currently own property.
- A minimum deposit of 2% of the property value is required.
- The scheme covers various property types, including existing homes, townhouses, apartments, and house-and-land packages.
The ideal applicant for the Family Home Guarantee
The Family Home Guarantee is particularly beneficial for single parents with a steady income. It helps those who have struggled to save a large deposit due to the costs associated with raising children.
An ideal applicant could be someone who is renting but wants to invest in a home for long-term stability and security
They might have a good credit history and stable employment but haven’t been able to save more than a small deposit.
Benefits of a 2% Deposit Home Loan
1. Get on the property ladder sooner
Saving for a 20% deposit can take years, especially with property prices continually rising.
The Family Home Guarantee allows you to buy a home with just a 2% deposit. This means you can enter the property market sooner rather than later.
2. Avoiding LMI
One of the significant benefits of this scheme is the ability to avoid LMI, saving you thousands of dollars.
3. Flexibility in property choices
Whether you’re interested in a new build, an existing home, a townhouse, or even an off-the-plan property, this scheme provides options that suit different needs and preferences.
How a mortgage broker can help
Navigating the Family Home Guarantee can be complex, and that’s where a mortgage broker comes in.
A broker can help you understand the eligibility requirements and guide you through the application process. They ensure you’re fully informed at every step.
We also have access to a network of lenders, including those participating in the Family Home Guarantee scheme.
This means they can help you find competitive rates and terms that you might not discover on your own.
Applying for a home loan under the Family Home Guarantee also involves a fair amount of paperwork and documentation.
A mortgage broker can handle much of this workload, streamlining the process and making it easier for you to focus on finding your dream home.
*This blog is intended for general informational purposes only. For personalised advice tailored to your unique financial situation, please contact NMC Finance.
