The Family Home Guarantee allows single parents to enter the property market with small deposits, as low as 2% of the property's value.
By acting as guarantor, the government will enable single parents to buy homes faster while avoiding the substantial cost of lenders mortgage insurance (LMI) that usually applies to low deposit borrowers.
Buyers in this scheme need to borrow the remaining 98% and must prove that they can repay the loan, as with any other borrower. There are currently 20,000 places available.
How does the Family Home Guarantee work?
Australian home buyers typically save a deposit of between 5% and 20% of their property's value. They save the deposit and borrow the rest. Under the Family Home Guarantee, an eligible single parent can buy a home with just a 2% deposit. On a $700,000, this is a deposit of just $14,000.
This is a much smaller deposit size and allows the borrower to get a home more easily. It does mean they have a bigger loan, however.
The scheme's big benefit: Avoid LMI costs
Normally, when your deposit is smaller than 20%, your lender will also charge you lenders mortgage insurance (LMI). LMI premiums can cost thousands, or even tens of thousands of dollars. LMI protects the lender in the event you can't repay the loan.
Under the Family Home Guarantee, a single parent can get a home loan with a 2% deposit and avoid lenders mortgage insurance. By acting as a guarantor, the federal government essentially backs the borrower and allows them to avoid this extra home buying cost.
Check the NHFIC website for more information about the scheme.
Who is eligible for the scheme?
To be eligible, a single parent must:
Be an Australian citizen (not a resident) with dependent children
Have an annual taxable income of $125,000 or less
Be an owner-occupier (but they do not need to be a first home buyer)
Be building a new home or purchasing an existing home
As with similar government schemes, there are region-specific price caps on properties. You can use the government's Property Price Cap Tool to look up the property price caps for your location. If the price of the property you are purchasing exceeds these caps, you will not qualify.
Property value caps
To be eligible for the scheme you must be purchasing a property valued at or below the following thresholds:
State/Territory/region
Price cap
NSW - capital city
$800,000
NSW - regional centre
$800,000
NSW - rest of state
$600,000
VIC - capital city
$700,000
VIC - Geelong
$700,000
VIC- rest of state
$500,000
QLD - capital city
$600,000
QLD - regional centre
$600,000
QLD - rest of state
$450,000
WA - capital city
$500,000
WA - rest of state
$400,000
SA - capital city
$500,000
SA - rest of state
$350,000
TAS - capital city
$500,000
TAS - rest of state
$400,000
ACT
$500,000
NT
$500,000
Jervis Bay and Norfolk Island
$550,000
Christmas Island and Cocos Island
$400,000
How do I apply for the scheme?
Applications can be made with a Participating Lender or their authorised representative (a mortgage broker); Housing Australia does not accept applications directly. Successful applicants need to apply for a home loan with a lender that is taking part in the scheme.
There is a limit of 20,000 places for the Family Home Guarantee, stretched out over several years.
Buying a home with just a 2% deposit does come with some risks. For one, you have very little equity in the property. This means that you start your home loan owning just 2% of the property. If the value of the property went down, your debt could end up being more than the property's value.
As long as you're able to make your loan repayments, then this is not a problem because you will be building your equity. But borrowing 98% also means that your loan will be quite substantial. The smaller your deposit, the more money you borrower. And the more you have to borrow, the more interest you pay.
While the Family Home Guarantee is a federal policy intended to support single parents, if you can't repay the loan, then the government won't help you. You will have to sell the property so the lender can recover the debt.
More guides and government support
The Family Home Guarantee is similar to the existing First Home Loan Deposit Scheme. This scheme allows first home buyers to enter the market with a 5% deposit. They can also avoid LMI costs.
Richard Whitten is a money editor at Finder, and has been covering home loans, property and personal finance for 6+ years. He has written for Yahoo Finance, Money Magazine and Homely; and has appeared on various radio shows nationwide. He holds a Certificate IV in mortgage broking and finance (RG 206), a Tier 1 Generic Knowledge certification and a Tier 2 General Advice Deposit Products (RG 146) certification.
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Hi,
Is there a way to apply/place deposit/secure something through the scheme for a later date, for example 2024, as I think my current income will not be enough for banks to lend me the remaining amount
There are some panel lenders that use a waitlist system to help them manage the strong demand for the schemes. While it’s not guaranteed that you’ll be able to hold your spot until the desired date, it’s a good idea to join the waitlist if you can.
Scheme place availability changes on a regular basis across all panel lenders, and when interest rates increase, that will impact your borrowing power as well. All of these variables make it difficult for your place to be “guaranteed”. If you’d like some guidance as you plan to buy a home, consider working with a mortgage broker. Their service is free, and they can help you navigate all of these next steps:
Hi
If I’m a single parent and have a 2% deposit, do I also need to have the stamp duty amount to pay from my own pocket ? Or does this amount get added to the loan ?
Thanks
You’ll need to pay for stamp duty on top of your deposit, and this is an additional cost on top of other upfront costs such mortgage application fees and conveyancing fees. These other fees and charges, including stamp duty, are not generally able to be added to the loan.
However as a first home buyer, you may be eligible for a hefty discount or even a waiver worth up to 100%.
On the top left of this page you’ll notice an option that says ‘Brokers’. Click on this to get a dropdown list of brokers; click on the name of the broker you want to learn more about, and you’ll be redirected to the Finder review page.
From there, you can select your area and you’ll be connected to a broker in your area to help you with your home loan.
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Hi,
Is there a way to apply/place deposit/secure something through the scheme for a later date, for example 2024, as I think my current income will not be enough for banks to lend me the remaining amount
Hi Jac,
There are some panel lenders that use a waitlist system to help them manage the strong demand for the schemes. While it’s not guaranteed that you’ll be able to hold your spot until the desired date, it’s a good idea to join the waitlist if you can.
Scheme place availability changes on a regular basis across all panel lenders, and when interest rates increase, that will impact your borrowing power as well. All of these variables make it difficult for your place to be “guaranteed”. If you’d like some guidance as you plan to buy a home, consider working with a mortgage broker. Their service is free, and they can help you navigate all of these next steps:
I hope this helps!
Cheers,
Sarah
Hi
If I’m a single parent and have a 2% deposit, do I also need to have the stamp duty amount to pay from my own pocket ? Or does this amount get added to the loan ?
Thanks
Hi Gab,
You’ll need to pay for stamp duty on top of your deposit, and this is an additional cost on top of other upfront costs such mortgage application fees and conveyancing fees. These other fees and charges, including stamp duty, are not generally able to be added to the loan.
However as a first home buyer, you may be eligible for a hefty discount or even a waiver worth up to 100%.
You can apply for the Family Home Guarantee through lenders directly, or through mortgage brokers participating in the scheme. Here’s a little more info:
https://www.nhfic.gov.au/support-buy-home/family-home-guarantee#eligibility-and-how-to-apply
I hope this helps,
Cheers,
Sarah
Hi I would like to have a professional (Broker?) contact me so I can check my eligibility and start the process.
Hi Troy,
On the top left of this page you’ll notice an option that says ‘Brokers’. Click on this to get a dropdown list of brokers; click on the name of the broker you want to learn more about, and you’ll be redirected to the Finder review page.
From there, you can select your area and you’ll be connected to a broker in your area to help you with your home loan.
Hope this helps!
Cheers,
Sarah