On 8 May 2021, under the 2021- 2022 Budget, Treasurer Josh Frydenberg announced the establishment of a new program called the Family Home Guarantee.
The Family Home Guarantee provides eligible single parents with dependants the opportunity to build a new home or purchase an existing home with a deposit of 2%.
From 1 July 2021, 10,000 Family Home Guarantees will be made available over four financial years.
The scheme is predominantly targeting single mothers with the government estimating that out of the 125,000 single parents who are eligible, 80% are women. At this stage the scheme will be limited to 10,000 participants, however the opposition government is calling for more spaces on the scheme to be available.
The Family Home Guarantee is aimed at single parents with dependants, regardless of whether that single parent is a first home buyer or previous owner-occupier. Applicants must be Australian citizens, at least 18 years of age and have an annual taxable income of no more than $125,000.
How will the Family Home Guarantee work?
More information on the Family Home Guarantee will be released this week, however initial information gives us a good indication of who will be eligible.
Income test
Maximum annual income for the FHG is $125,000 (the same as the First Home Loan Deposit Scheme) in the preceding financial year. Child support payments are excluded from this income cap.
Current property ownership test
The single parent can’t currently own property but if they have previously owned a property, that is acceptable. This scheme is not limited to first home buyers.
Citizenship test
Applicants must be an Australian citizen and must be 18 years or older.
Deposit requirement
The single parent must have a minimum 2% deposit. That means you must have savings of 2% of the price of the property price. The government will guarantee up to 18% of the property purchase price, allowing the applicant to get a loan without paying LMI.
Owner occupier test
The single parent is the only person listed on the title and the loan and must live in the home. This scheme can’t be used for investment property purchases.
Borrowing capacity
The single parent will still be subject to lender assessments to ensure the borrower can make repayments on the home loan.
Type of housing
You can purchase a new or existing dwelling worth up to the price caps.
How can you access the Single Parent Family Home Guarantee?
As there are only 10,000 guarantees available over the next 4 financial years, it’s likely the government will release the places slowly through selected lenders. Similar to how the First Home Buyer Deposit Scheme works, the single parent will need to apply for a place on the scheme.
The best way to get on the waiting list is to start preparing your home loan application now. You can read our top tips on what to do before apply for a home loan.
If you’re serious about buying under this scheme, now is a good time to ensure you have the 2% deposit saved and also speak with an experienced mortgage broker to find out how much you can borrow and ensure you will qualify for home loan.
Further reading
Australian Government Family Home Guarantee Media Release
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