Most home loan lenders require homeowners to have a minimum deposit of 20% to qualify for a loan. With the First Home Guarantee Scheme, the Australian government allows you to borrow up to 95% of the property value if you are eligible.
What is the First Home Guarantee Scheme
The First Home Guarantee Scheme is an initiative under the Home Guarantee Scheme where the Australian government collaborates with participating lenders to assist first-home buyers in purchasing a home with lower upfront costs.
In this initiative, the government, through Housing Australia, guarantees to pay the lender in case a homeowner defaults on their mortgage payment.
However, homeowners must meet certain eligibility requirements to qualify for this scheme. These include:
- You must be 18 years or older
- You must be an Australian citizen or permanent resident
- You must have a minimum deposit of 5% of the property value (not the purchase price)
- You must be a first-time owner (or have not purchased a home in the last ten years in Australia)
- You earn a taxable income of $125,000 or less if you are purchasing a home as an individual. For joint buyers, the combined income should not exceed $200,000.
- You are purchasing the home to live in it (owner-occupier)
- You are taking an owner-occupier home loan with a maximum repayment period of thirty years (and an additional three years if you’ll be building your home)
You could also choose from the Regional First Home Buyer Guarantee or the Family Home Guarantee if you meet additional eligibility requirements.
How To Apply for the First Home Guarantee Scheme
If you meet the eligibility requirements for the First Home Guarantee Scheme, you can proceed to submit your application. Here are the steps to follow:
Step 1: Find a participating lender authorised by Housing Australia. These lenders will evaluate your eligibility and submit your application to Housing Australia if you meet the qualification criteria.
Step 2: Complete your application. Once a participating lender submits your application, Housing Australia reserves a Guarantee position for you for up to 14 days, within which you must submit your completed application with all the supporting documents.
Step 3: Find a home. If Housing Australia pre-approves your application, you have up to 90 days to find a suitable home and sign a contract of purchase. You can purchase an existing home, apartment, or townhouse, an off-the-plan home, or vacant land, but it shouldn’t exceed the set property price caps.
Step 4: Buy and move into your home. After you find a suitable home, your lender will finalise the approval process for your home loan. Sign your purchase contract and move into your new home.
Step 5: Maintain your eligibility. You must remain eligible for the First Home Guarantee Scheme or apply for a Lender’s Mortgage Insurance. Here are instances when you could stop becoming eligible for the First Home Guarantee Scheme:
- You’ve fully repaid your home loan
- You stop living in the home
- You rent out or sell your home
- You change your home loan to a non-participating lender