Family Home Guarantee: How does it work and am I eligible?

The Federal Government’s Family Home Guarantee scheme aims to make it easier for Australian single parents to own their own homes, with government guarantees on home loan deposits as low as 2%.

Announced in the 2021 Federal Budget, the scheme commenced on 1 July 2021 and will run over four years. A total of 5,000 guarantees will be made available each year from 1 July 2022 to 30 June 2025.

So how does this initiative work and who is actually eligible? Read on for more information in our Family Home Guarantee guide.

Property prices in Australia have skyrocketed in recent years. As a result, saving up for a deposit has become more difficult and time-consuming, especially if you’re doing it on a single income.

That’s the issue the Family Home Guarantee scheme hopes to address. It’s designed to make purchasing a home easier and quicker by giving single parents with dependents the chance to purchase a new or existing home with a low deposit.

What counts as a lower deposit? Typically it’s one below 20% of the total property price, which is the minimum amount generally required of borrowers to avoid having to take out lenders mortgage insurance (LMI). LMI is an added expense which can run into the thousands of dollars.

Instead, the government will guarantee home loans taken out under the Family Home Guarantee scheme for buyers with deposits between 2% and 20%, meaning single parents will potentially be able to purchase a home faster, and without the hassle of taking out LMI.

As you’d expect, the Family Home Guarantee scheme has quite a few requirements that prospective applicants will need to meet:

• Only single parents with at least one dependant child will be eligible

• Applicants will have to have an annual taxable income below $125,000

• The scheme can be used for new builds or to buy existing homes

• Both first home buyers and those re-entering the market can apply

• Applicants must be Australian citizens aged 18 and over

• Loans taken out through the scheme can’t be longer than 30 years

• Borrowers must have a deposit between 2% and 20%

Borrowers can choose between the roughly 30 lenders who are already participating in the First Home Loan Deposit Scheme (FHLDS). They include: 

• Australian Military Bank

• Australian Mutual Bank

• Bank Australia

• Bank First
  

• Bank of Us

• Bendigo Bank

• Beyond Bank Australia

• Commonwealth Bank

• Community First Credit Union

• Defence Bank

• Firefighters Mutual Bank

• G&C Mutual Bank

• Gateway Bank

• Great Southern Bank

• Health Professionals Bank

• Indigenous Business Australia

• MyStateBank

• NAB

• People's Choice

• QBank

• Queensland Country Bank

• Regional Australia Bank

• Teachers Mutual Bank

• The Mutual Bank

• UniBank

• WAW

Chief executive of Commonwealth Bank, Matt Comyn, welcomed the Family Home Guarantee when it was first announced, describing it as another way the bank could help customers own their own home.

“We know how challenging it can be for single parents to support their family and save for a deposit for a home. This announcement will come as a welcome relief for hard working single parents, particularly those working in essential services such as education, health care and public safety, looking to buy their first home or re-enter the property market.”

Like the FHLDS, the Family Home Guarantee program will also come with specific price thresholds depending on where you intend to buy. In fact, they’re the same as the FHLDS. For example, you’ll find that capital cities and regional centres with a population of more than 250,000 come with higher price caps than other regional areas, given they tend to be more expensive.

Price caps in Australian states

Price caps in Australian territories

While the Family Home Guarantee is designed to help single parents enter the property market, it’s not completely without its risks. After all, most participants will still be taking out a sizeable loan which they’ll need to repay with interest.

Some factors participants may want to bear in mind include:

Interest rates: Home loan rates are at some of their lowest levels in years, but they’re on track to start rising again. Of course, this is a consideration all borrowers need to make. But given participants in the scheme will be paying down relatively large loans (because of the lower deposits), it may be worth ensuring that repayments can be made at a higher rate if rates do rise.

Negative equity: Negative equity occurs when the value of a property falls below the balance owed on a mortgage, which means borrowers with higher loan-to-value ratios (LVRs) (i.e. they’ve borrowed with smaller deposits) are likely to be more susceptible.

Participating lenders: Participating lenders: There are a number of different lenders participating in the Family Home Guarantee scheme which buyers will be able to choose from when picking a mortgage, but every lender is different. That’s why it’s always worth comparing home loan options to make sure you’re getting a competitive rate and all the features you want.

While the Family Home Guarantee is one of the newest housing initiatives launched by the government, there are also a number of other existing schemes, programs, rebates and incentives first home buyers in particular can take advantage of.

First Home Loan Deposit Scheme (FHLDS)

As mentioned above, the government has an existing initiative for first home buyers with lower deposits called the First Home Loan Deposit Scheme (FHLDS). This allows first-time buyers to get a home loan without LMI with a deposit as low as 5%, and the government has just announced 10,000 new spots which will open from July 1, 2021.

First Home Super Saver Scheme

There’s also the First Home Super Saver Scheme for Australians saving up for their first home. Essentially, this scheme allows young Australians to make additional contributions to their superannuation of up to $15,000/year to a total cap of $50,000. These can then be withdrawn to put towards a home deposit. 

Stamp duty rebates

Last but not least, there are still a number of stamp duty rebates and other incentives offered by various state and territory governments around Australia that first home buyers can also make use of. Check out our stamp duty calculators to see exactly how much you could save.

RELATED: First home buyers - what you need to know

As more information emerges on the scheme we’ll keep updating this guide, but for more details you may be interested in checking out the National Housing Finance and Investment Corporation (NHFIC)’s run through of the FHG.

Otherwise head on over to our home loan resources page for more home loan guides and tips, as well as a range of handy calculators.