First Home Buyers Guarantee
The First Home Buyers Guarantee (FHBG) Scheme is a federal level of assistance designed to help first home buyers purchase their house with less than a 20% deposit, reducing the amount you might need to save to afford your first home. Generally, lenders require you to have at least 20% of the purchase price of a property as a deposit, so you are only borrowing a maximum of 80% of the value. You can borrow more than this, however lenders will then charge you Lenders Mortgage Insurance (LMI) to protect themselves. Many first home buyers will need to borrow more than 80% to be able to buy the house they want, but they can’t afford to pay the cost of LMI.
With the FHBG Scheme, Housing Australia will guarantee up to 15% of your loan value, meaning that you can borrow up to 95% of the purchase price and avoid paying LMI costs. This means that you may only need as little as 5% deposit to buy the house. You will also pay the same home loan rates as someone who was only borrowing 80% loan to value ratio.
There are income thresholds that apply – single applicants can’t be earning over $125,000 and joint applicants can’t be earning over $200,000 combined. The FHBG Scheme can be used to purchase already established dwellings, house and land packages, land and contract to build packages, and off the plan apartments or townhouses. Property price caps for the scheme vary again between each state, but for QLD the maximum property value is $700,000.
Only certain lenders participate in the FHBG Scheme, and the amount of deposit required may vary with each participating lender and your individual financial circumstances. There are also only a certain number of places for the FHBG Scheme available each financial year.
Regional First Home Buyer Guarantee
This scheme is similar to the FHBG Scheme as explained above, but is available for buyers in regional areas. All the same eligibility criteria and principles apply, the only difference are the property price caps. For example, in QLD the scheme applies to properties in regional areas valued up to $550,000.
Family Home Guarantee
This guarantee scheme is available for single parents or legal guardians of at least one dependent who haven’t previously been homeowners. It works in a similar way to the FHBG Scheme, however Housing Australia will guarantee up to 18% of the loan value, meaning eligible applicants may only need to have as little as 2% deposit saved. Income is capped at $125,000 per year, and the same property price caps as the FHBG and Regional FHBG Scheme apply.
First Home Super Saver (FHSS) Scheme
This scheme is implemented by the Australian Taxation Office (ATO) and is designed to help first home buyers save for a deposit by allowing them to make voluntary contributions into their superannuation fund that can then later be withdrawn for the purpose of buying a home.
There may be advantages of saving for a house deposit using super contributions rather than simply a bank account. For example, superannuation is taxed differently to personal savings, and the contributions you make may result in extra earnings whilst the money is in your super. The earnings from your voluntary contributions under the FHSS Scheme can also be withdrawn at the time of buying a house to form part of your deposit. The maximum amount you can apply to release under the FHSS Scheme is $50,000.
The FHSS Scheme is only available for first home buyers who have never owned or had interest in any property in Australia, including investment or commercial property.
In summary, there are several different grants or schemes that may be available to you as a first home buyer to help you get on the property ladder and own your own home sooner. Although the different eligibility criteria across the various schemes can be complex and confusing, it is worth considering the assistance available to you as sometimes it may make all the difference as to whether you can afford that new home now, or several years down the track.
