The dream of owning a home is deeply ingrained in Australian culture. For many, it represents a significant milestone in their lives, symbolising financial security and stability. But with the rising cost of housing in many parts of Australia, it has made this aspiration increasingly challenging for first-time buyers.
Further, the dream of owning a home has been made even more difficult due to stricter lending practices by banks, sluggish wage growth relative to inflation, and concerns about fluctuating interest rates. In response to this challenge, commencing on July 1st, 2023, the government’s Home Guarantee Scheme expanded its eligibility criteria to make it more accessible for individuals who have long held the aspiration of homeownership.
The First Home Guarantee is an Australian Government initiative aimed at speeding up the ability to buy a home for eligible buyers. The Scheme comprises several key components, each aimed at assisting first-time buyers in different ways:
This component of the Scheme helps eligible first-home buyers secure a home loan with a lower deposit. Typically, banks require a deposit of at least 20% of the property’s value. Under the scheme, eligible buyers can purchase a home with as little as a 5% deposit. The government guarantees the remaining portion of the deposit, effectively eliminating the need for costly Lenders Mortgage Insurance (LMI). This makes homeownership more attainable for those who may have been struggling to save a large deposit.
Beginning on July 1, the upcoming changes will extend eligibility beyond singles and de-facto couples to encompass family members, siblings, and friends who can collaboratively apply and divide the expenses associated with a first home deposit.
This program is for eligible first home buyers looking to purchase their first home in a regional area. It enables them to do so with a deposit as low as 5%, without incurring the expenses associated with LMI.
On July 1, the upcoming changes will also extend eligibility beyond singles and de-facto couples to encompass family members, siblings, and friends who can collaboratively apply and divide the expenses associated with a first home deposit.
This initiative offers eligible single parents with dependents the opportunity to apply for a mortgage with as little as a 2% deposit, without attracting LMI, thanks to the government acting as guarantor. It’s accessible to both first-time homebuyers and single parents seeking to enter or re-enter the property market, whether they intend to purchase an existing property or build a new home. This scheme is intended to help alleviate some of the financial stress that often accompanies single parenthood.
Starting from July 1, the forthcoming changes will broaden eligibility criteria to encompass not only single parents but also single legal guardians of children, including siblings, aunts, uncles, and grandparents.
To apply for the Scheme, following the changes that took effect on July 1, prospective homebuyers must meet the following criteria:
In order for a property to qualify for eligibility, it must meet the criteria of being categorised as a ‘residential property’. Residential properties that meet the eligibility criteria encompass the following:
The program aids in the acquisition or construction of a modest home, with the condition that the residential property’s value does not surpass the applicable price cap for its location. The specific price caps for capital cities, major regional centres, and regional areas can be referenced here.
When it comes to financing your new home, it’s essential to temper your excitement with thoughtful consideration and careful decision-making. Owning a home is a significant step that demands thorough research and prudent choices that can profoundly impact your future as a homeowner. Several key considerations should include:
Begin by defining the type of home you’re seeking. Are you in pursuit of your dream home, or is an entry-level home more aligned with your current goals? Consider your family’s needs, the required space, and whether the home should accommodate future growth. Additionally, assess if the neighbourhood matches your lifestyle preferences and necessities.
Evaluate your financial situation. Determine the amount you can save for a deposit, as a larger deposit can reduce long-term interest costs on your loan. Ensure your income and financial stability align with your new home purchase and think about whether you’ll be able to consistently service your mortgage. Explore potential government initiatives or subsidies for which you may be eligible.
Delve into the specifics of your home loan. Have you consulted with a mortgage broker to explore various loan options? Understand whether you’ll be subject to paying LMI and assess whether a fixed or variable interest rate is more suitable for your circumstances. Additionally, consider whether you’ll secure your home loan through a traditional bank or an alternative lender.
By taking these factors into account and speaking with our expert mortgage brokers in Geelong we can help you navigate the process of financing your new home with confidence and set a solid foundation for your homeownership journey.
The expert lenders at The Hrkac Group are committed to helping borrowers get the most from their lending. Our in-house team of financial experts can help you create a financial plan that works for you and your individual circumstances and can help you make the right decision about managing your home loan. If you want to discuss your options, speak to an expert Geelong Mortgage Broker at The Hrkac Group.
Our Geelong Mortgage Brokers’ expertise and experience in facilitating your home loan can help ensure a positive experience for you. To make an appointment to meet one of our friendly Geelong Mortgage Brokers today, feel free to contact us via email or phone (03) 5221 2355.
The information provided in this blog is of a general nature only and is not intended as either advice or recommendations and is not tailored to your specific circumstances. Please also note that this does include any information on any Payroll requirements imposed by any State or Territory Governments outside of the State of Victoria. Please contact our partner – SIBS Bookkeeping team or us – the Hrkac Group Accountants team – if you would assistance as to how, or if, any of the abovementioned would apply to you.
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