The Federal Budget was handed down at the start of the month and it contains good news for some first home buyers.
In particular, the First Home Guarantee is set to be expanded, with the potential to make buying their first home a more achievable goal for many Australians.
What is the First Home Guarantee?
The First Home Guarantee is part of an Australian Government initiative called the Home Guarantee Scheme (HGS). This initiative was designed to help eligible first-home buyers purchase a home sooner.
In basic terms, the First Home Guarantee allows eligible recipients to purchase a home with a deposit significantly below the usual 20% that is expected. In order to allow this, the government goes guarantor and provides the funds to make up the 20% deposit.
If you’re eligible, you can buy with a 5% deposit. The government will guarantee the other 15%.
There are now 35,000 places available each year for eligible applicants. A further 10,000 places will be available under the Regional First Home Buyer Guarantee until June 30, 2025.
Restrictions apply; for example you can’t spend over $900,000 if you’re buying a home in Sydney. Other cities are limited to between $800,000 and $600,000.
The changes
In acknowledgment of current challenges around housing affordability, the Federal Budget included extensions to the eligibility requirements for the First Home Guarantee. Going forward, instead of the guarantee being limited to individuals and couples, siblings and friends who wish to make their first home
purchase together may do so.
The other change will allow Australian permanent residents as well as citizens to apply for the First Home Guarantee.
Finally, it was announced in the May budget that buyers who have previously owned a home may be allowed to apply, as long as it has been ten years or more since they last had a property.
The following eligibility criteria for the First Home Guarantee still apply:
• You must be at least 18 years of age
• You must be earning up to $125,000 for individuals or $200,000 for couples, as shown on the Notice of Assessment (issued by the Australian Taxation Office)
• You must intend to be owner-occupiers of the purchased property
• You must be first home buyers who have not previously owned or had an interest in a property in Australia
The Federal Budget also announced 5,000 guarantees each year from 1 July 2022 to 30 June 2025 to expand the Family Home Guarantee. This scheme helps eligible single parents to buy their first home or to re-enter the housing market with a deposit of as little as two per cent.
Why the changes?
Housing costs have risen to the point where saving for a deposit can take up to ten years, even if you have the means to pay off a mortgage. However, home ownership is still a goal and a wealth building strategy for many Australians and the government wants to support their efforts.
Housing Minister Julie Collins told the ABC, “We know friends and family members are already teaming up to secure their own place to call home. Our actions will allow them to access vital assistance, just as couples have been able to previously.”
How do I know if I’m eligible?
The NHFIC website offers an eligibility tool so you can see if you are eligible for the First Home Guarantee now or in the next financial year.
It’s also a good idea to have a discussion with your accountant, real estate agent and mortgage broker so you can figure out what you can afford in terms of a home loan.
Ready to buy your first home? Get in touch with me today at teresa@teresaberger.com.au
