Demand for low deposit home loan scheme expected to boom

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Prospective home buyers looking to secure a place in the government’s low deposit home loan scheme have been told to get a move on, with the expansion of eligibility criteria from July 1 likely to lead to increased demand.

The new financial year will see the First Home Guarantee and the Regional First Home Buyer Guarantee opened to those who have previously owned property, as long as they have not owned property for at least 10 years.

Significant expansion of eligibility criteria for low deposit guarantees likely to see increase in demand for places.Credit: Louie Douvis

Those two guarantees, and the Family Home Guarantee, will be made available to permanent residents, rather than just Australian citizens. The expansion of eligibility criteria – subject to passage through parliament – is part of the Albanese government’s strategy for easing the housing crisis.

While the total number of 50,000 places for the 2022-23 year is the same as the current financial year, demand for places is likely to be stronger.

Rob Lees, the principal of Mortgage Choice, Blaxland and Penrith, says those thinking of applying should probably start checking the selection criteria and gathering the relevant information.

“If places do start to run out, they should take up the places sooner rather than later,” he says.

The guarantees – which have salary limits for applicants and caps on purchase prices, depending on the location of the property – allow home buyers to pay a deposit of only 5 per cent, or 2 per cent, depending on the guarantee.

Applicants show they meet the income requirements with a notice of assessment from the Australian Taxation Office. Intending applicants may want to consider bringing forward the completion of their income tax returns for the current financial year, Lees says.

From 1 July this year, eligibility for the First Home Guarantee and for the Regional First Home Buyer Guarantee, which were open to first home buyers only, will be expanded to include non-first home buyers who have not owned property for ten years.

Lees says that will be a big help to those who have owned properties jointly, but are no longer together and have been renting. “It’s this group that is often forgotten – those who have been renting – it’s hard [for them] to start over again, later in life,” he says.

From July 1, the two schemes will also be open to friends, siblings, and other family members, who will be eligible for joint applications. It had previously been restricted to those who are married or in defacto relationships, as well as to applicants who are single.

The Family Home Guarantee, originally designed for single parents, will be expanded from July 1 to include adoptive parents and single legal guardians of children, such as aunts, uncles and grandparents.

An eligible home buyer for the Family Home Guarantee can be a previous home-owner or a first home buyer and can purchase a home under the guarantee with a deposit of only 2 per cent.

All guarantees are available for the purchase of new or existing properties, where the purchaser intends to live in the property.

There will be 35,000 places available this coming financial year in the First Home Guarantee, 10,000 places in the Regional First Home Buyer Guarantee, and 5000 places in the Family Home Guarantee.

Places are still available in the guarantees before the end of this financial year, under the original eligibility criteria.

The National Housing Finance and Investment Corporation, which administers the guarantees on behalf of the federal government, says there are 32 lenders who participate in the guarantees.

Applications for guarantees are made directly with participating lenders or through mortgage brokers.

  • Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.

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