On March 29 2022, Treasurer Josh Frydenberg announced that the Federal Government is doubling down on its efforts to combat the cost of living. It focuses on getting more people into their own homes by lending a hand with upfront expenses that are the biggest roadblock to homebuying.
Most notably, the government has upgraded the First Home Guarantee and the First Home Super Saver Scheme.
The First Home Guarantee has been around for a few years (previously known as the First Home Loan Deposit Scheme). Initially, only 10,000 applicants per year were accepted, but the government has more than doubled the number of grants under the expanded ‘First Home Guarantee’ scheme.
How can you use the First Home Guarantee?
The First Home Guarantee lets you buy a home using a 5% deposit instead of 20%. The Federal Government ‘backs’ the other 15% of your deposit, so you avoid the Lenders Mortgage Insurance (LMI) that’s normally applied to protect the lender from risk. Since LMI can run into tens of thousands of dollars, it’s a hefty saving.
For instance, a $500,000 new home would only require a $25,000 deposit (5%) under the First Home Guarantee. Lenders Mortgage Insurance would be waived, saving you around $15,000.
Under the new 2022-23 budget changes, the First Home Guarantee scheme looks like this:
- 35,000 guarantees each year instead of 10,000, starting 1 July 2022. You can purchase a new or existing first home with as little as 5% deposit.
- 5,000 guarantees each year from 1 July 2022 for single parents to buy a first home or re-enter the housing market with as little as 2% deposit. The expiry date for this grant is 30 June 2025.
- 10,000 guarantees each year from 1 October 2022 under a new Regional Home Guarantee scheme that allows you to buy or build a home in a regional area, as long as you haven’t owned property within the last five years.
The First Home Guarantee hopes to slash the amount of time needed to save up a deposit. That’s good news for buyers, since it takes almost six years to save a minimum 20% deposit for an entry-level house, according to Domain’s latest First Home Buyer Report.
Single parents can deposit as little as 2%.
The government highlighted specific support for single-parent families with dependent children earning under $125,000 per year. Under the single parent’s category, you can deposit just 2%, with the government guaranteeing the other 18%.
On a $500,000 home, that’s $10,000. No Lenders Mortgage Insurance would apply.
The Treasurer said, “the Family Home Guarantee recognises that the challenge of saving a deposit is even harder when you’re on a single income while raising children.”
If that’s you, you can apply for one of 10,000 grants per year in the single parent category.
How do you apply?
Eligibility criteria apply for the First Home Guarantee. Single applicants must have a taxable income under $125,000 per year, and couples must have a combined income under $200,000.
You must also be an Australian resident to apply, except for the regional grant which is also open to permanent residents.
Applications for the First Home Guarantee must go through an authorised mortgage broker or lender. See the Federal Government website for more about applying.
Changes to the First Home Super Saver Scheme
In the budget address, the treasurer also announced changes to the First Home Super Saver Scheme (FHSSS). The FHSSS allows you to use money you’ve contributed to your superannuation as a deposit for a home. You can save up to $15,000 per year into your super, allowing you to pay a lower tax rate and reduce your taxable income as well.
Under the new budget changes, the amount you can use towards your deposit will be boosted from $30,000 to $50,000 as of 1 July 2022.
What other grants can you bundle with the First Home Guarantee?
If you’re a first-time buyer, the First Home Owners Grant could help you amass a deposit without taking a dollar out of your own pocket.
The amount of grant money varies across states and territories. In Queensland, the government contributes $15,000 for first home buyers.
As an extra bonus, we’re also helping new homeowners by offering a $15,000 Insignia Homes Builders Grant when you’re building a brand new home with us. Combined with the grants on offer, you could be well on your way to a fully-funded deposit.
For example, if your home costs $450,000, your deposit under the First Home Guarantee would be $22,500. The $15,000 First Home Owners Grant would leave you with just $7,500 remaining, which could be assisted by the Insignia Builders Grant.
Bundling grants and getting started
Government grants help you buy your first home, but there can be a few terms and conditions attached. If you need a hand deciding which grants you’re eligible for, and applying for grants, we can help anytime. Our consultations are totally free, and we’re happy to sit with you and map out the possibilities ahead.
The new budget changes are making it more possible than ever for first homebuyers to own a home, even when the market doesn’t feel favourable. As the saying goes, the best time to buy a property was yesterday, the second-best time is right now.