Opening Doors to Homeownership: 3 Positive Impacts of the Home Guarantee Scheme Expansion on First Home Buyers
If you’ve been planning to purchase your first home for some time now, this year may be the year to do it. Saving up for a home can take a long time because it’s recommended to save up to 20% of the total home price as a deposit. But thanks to the new changes to the Home Guarantee Scheme (HGS), more people may be able to buy their first homes with as little as a 5% deposit.
On top of this, the scheme has opened to non-first home buyers. If they meet the criteria, those who have previously owned a home could be eligible for the guarantees. In this article, we’re going to learn more about the expansion of the HGS and the positive impacts it brings.
What is the Home Guarantee Scheme (HGS)?
The Home Guarantee Scheme (HGS) is a program initiated by the Australian government to assist eligible first-home buyers in achieving their goal of homeownership.
Under the HGS, the government provides a guarantee for up to 15% of the value of a property being purchased by first-home buyers who have saved at least 5% of the deposit required to purchase a property. The guarantees allow these buyers to access home loans with smaller deposits, making it easier for them to get into the property market.
Type of Home Guarantee Schemes
There are three types of Home Guarantee Schemes based on the website of the National Housing Finance and Investment Corporation (NHFIC):
1. First Home Guarantee
The First Home Guarantee Scheme aims to help first home buyers enter the property market by providing a guarantee to eligible applicants with a deposit as low as 5% of the property purchase price. The scheme provides up to 15% of the property’s value, which can be used as security to obtain a home loan without paying lenders’ mortgage insurance.
2. Regional First Home Buyer Guarantee
The Regional First Home Buyer Guarantee scheme is similar to the First Home Guarantee, but it targets first home buyers looking to purchase a property in regional areas. The scheme offers the same level of support, with eligible applicants able to purchase a home with a deposit as low as 5% of the property purchase price. The scheme provides a guarantee for up to 20% of the property’s value.
3. Family Home Guarantee
Lastly, the Family Home Guarantee Scheme is designed to assist eligible single parents with dependent children and those who have a taxable income of up to $125,000 to purchase a home. Under the scheme, the federal government acts as a guarantor on up to 18% of a loan, allowing home buyers who meet the criteria to purchase a home with as little as a 2% deposit.
Expansion of the Home Guarantee Scheme (HGS)
A media release was published on 30 April 2023 stating that the Home Guarantee Scheme (HGS) has been so successful in assisting many Australians in achieving home ownership that the government has decided to extend its eligibility criteria to support even more first home buyers.
The media release details the government’s plans to expand the scheme, including increasing the maximum property purchase price in New South Wales, Victoria, and Queensland to $950,000, and expanding eligibility to include single guardians with dependent children.
According to the Hon. Julie Collins MP Minister for Housing, Minister for Homelessness, Minister for Small Business, the expansion is part of the government’s commitment to supporting Australians in achieving home ownership and addressing the challenges of housing affordability.
You may read the full media release here.
3 Positive Impacts of the First Home Guarantee Scheme Expansion on First Home Buyers
The eligibility criteria for all elements of the scheme — including the First Home Guarantee, the Regional First Home Buyer Guarantee, and the Family Home Guarantee — will be expanded as early as July 1 starting with joint applications for shared equity schemes.
Other major changes include:
- An expansion to incorporate permanent residents into the guarantee schemes
- An expansion to allow more single guardians to use the Family Guarantee
- A change that enables those who have previously owned properties to join the scheme
So what type of impact can we expect from the expansion? It’s likely to have positive impacts on both the housing market and individual buyers. More specifically:
1. More People Will be Eligible
By broadening the eligibility criteria, a greater number of people will now qualify for different guarantee schemes, enabling them to enter the property market when they may not have been able to do so previously. For instance, the changes to the First Home Guarantee and Regional First Home Guarantee will allow joint applications from individuals in de facto relationships, friends, siblings, and other family members.
2. Open to Single Legal Guardians
The eligibility criteria for the Family Home Guarantee have been expanded to include single legal guardians of children, including aunts, uncles, and even grandparents. Through this scheme, the federal government provides a guarantee for up to 18% of a loan.
3. Expanded to Non-First Home Buyers
The Home Guarantee Scheme has been expanded to include non-first home buyers who have not owned a property in Australia in the last decade. This extension is aimed at assisting individuals who have lost their homes, often due to financial difficulties or relationship breakdowns.
Are You Eligible for the Home Guarantee Scheme?
The Home Guarantee Scheme (HGS) can be complex and so some home buyers have chosen to seek the help of experts to gain a deeper understanding of the process and to receive advice on finding the right property.
At Vision, we want to help all first home buyers overcome the challenges that they are faced with when purchasing their first home. We understand that purchasing a first home can be complex, and ultimately is one of the most daunting and biggest purchases that is made by an individual.
Whether you’re trying to save for your first home deposit or want to understand what first-home buyer schemes you’re eligible for, we recommend reaching out to us. Let us deal with the complexities and provide you with the right information to guide you on your property and finance journey.
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