Owning a home is a dream that many individuals cherish, symbolising stability, security, and a sense of belonging. However, the path to homeownership can be challenging, particularly for first-time buyers who face the daunting task of saving for a substantial deposit. To address this hurdle and make homeownership more accessible, the First Home Guarantee Scheme (Formerly known as FHLDS – First Home Loan Deposit Scheme) is a government incentive designed to accelarate the path to homeownership.
Key Features of the FHGS
- Reduced Deposit Requirement: The characteristic of the FHGS is its provision for qualified first-time buyers to enter the property market with a deposit as low as 5%. Unlike the conventional 20% deposit demanded by most lenders, this reduction eases the financial burden and enhances accessibility to homeownership.
- Government Guarantee: In the FHGS, the government acts as a guarantor for the portion of the deposit that exceeds the buyer’s initial contribution. This guarantee mitigates risk for lenders, enabling them to offer home loans with lower deposits while waiving the need for borrowers to pay Lenders Mortgage Insurance (LMI).
- Limited Availability: The FHGS operates within a predetermined number of places each financial year. This restriction ensures that the scheme remains accessible to those who require it the most, while preventing any potential overextension.
- Eligibility Criteria: To be eligible for the FHGS, applicants must satisfy specific criteria, including meeting income thresholds and property price caps. These criteria are designed to direct assistance to individuals facing significant barriers to homeownership.
Eligibility and Application Process
- The applicants must be at least 18 years of age and be an Australian citizen or Permanent resident at the time of entering the loan
- Single applicants earning up to $125,000 or joint applicants earning up to $200,000
- From 1st July 2023, joint applications can be extended to other family members, friends
- Provide evidence of 5% genuine savings or rental ledger
- Declare that you are a first home buyer without any prior ownership in any properties
The application process typically involves applying for a participating lender’s home loan under the FHGS. Once approved, the lender coordinates with the government to secure the necessary guarantee for the loan.
Benefits of the FHGS
- Reduced Deposit Requirements: The FHGS offers a clear advantage by enabling first-time buyers to enter the property market with just a 5% deposit, which is a substantial reduction compared to the conventional 20% deposit required by most lenders.
- Elimination of Lenders Mortgage Insurance (LMI): By reducing the mandatory deposit and serving as a guarantor for the remaining amount, the government eliminates the need for borrowers to pay LMI, leading to significant upfront cost savings for buyers.
- Accelerated Path to Homeownership: With lower deposit requirements and waived LMI, the FHGS paves the way for first-time buyers to potentially realize their dream of owning a home sooner than anticipated, expediting the journey to homeownership.
The First Home Deposit Scheme has undoubtedly been a transformative endeavor, unlocking the doors to homeownership for numerous first-time buyers. If you have been saving for a while you may be eligible to own your home sooner rather than later. Contact me today to find out more information.