What the new Family Home Guarantee program means for single parents

September 19, 2023 Catherine Salat

In the recent federal budget, the government made two significant policy decisions aimed at buyers who often find it hard to buy a property.

The first was to create a new program, called the Family Home Guarantee, to help single parents. The second was to expand the First Home Loan Deposit Scheme (New Homes), to help first home buyers.

What is the Family Home Guarantee?

The Family Home Guarantee is a new program introduced to help single parents buy a home with a deposit as low as 2%.

Generally, when you have less than a 20% deposit, you have to pay lender’s mortgage insurance (LMI), which can cost thousands of dollars. However, with the Family Home Guarantee, the government will guarantee 18% of the loan, giving you a nominal 20% deposit, therefore allowing you to avoid LMI.

Unlike the First Home Loan Deposit Scheme, which is only for first-time buyers, the Family Home Guarantee is available to all owner-occupiers who do not currently own a home.

Single parents generally have less buying power than couples, which can make it harder to buy a property. The Family Home Guarantee will make it easier for single parents to qualify for finance, which in turn will make it easier for them to break into the property market.

The Family Home Guarantee kicks off on 1 July 2021 and will run over the next four financial years. It will have 10,000 spots available to eligible single parents during these four years. To qualify, you must:

  • Be at least 18 years old
  • Be an Australian citizen
  • Earn an annual income of less than $125,000
  • Have at least one dependent child
  • Buy a residential house you plan to occupy

Does the Family Home Guarantee entitle you to a home loan?
No, the Family Home Guarantee scheme does not guarantee that your home loan application will be approved. One of the conditions of qualifying for the program is being able to service a loan, among other criteria. And no lender will give you a mortgage unless they’re convinced you have the capacity to repay the loan.

However, the Family Home Guarantee does make it easier to qualify for a loan, because you can enter the market with a smaller deposit and you don’t need to pay LMI.

What’s the First Home Loan Deposit Scheme and First Home Loan Deposit Scheme (New Homes)?

There are two parallel schemes that are open to 20,000 eligible first home buyers:

Under both schemes, the first home buyer puts down a deposit of just 5% and the government guarantees 15%, giving the borrower a nominal 20% deposit so they avoid LMI.

The FHLDS, which was introduced in January 2020, is an ongoing scheme that will continue into the 2021-22 financial year. Initially, the FHLDS (New Homes) was meant to run from 1 July 2020 to 30 June 2021. However, the government has now extended the scheme by 12 months, to 30 June 2022.

Demand is expected to be high, with spots on both schemes snapped up fast. If you don’t want to miss out, now is a good time to start preparing your finances by working with the team at Just Imagine Finance.

Just Imagine Finance can help you get a home loan

Whether you’re a single parent or a first home buyer, it can be hard to understand the complicated home loans process … even before you try to get your head around the Family Home Guarantee and First Home Loan Deposit Scheme (New Homes).

Relax. We’re here to help. We’ll guide you through this complicated process and explain everything to you in plain English. We’ll assess your unique circumstances and help you secure a home loan structured in a way that best fits your financial situation.

For a consultation, call Just Imagine Finance on 0414 673 359 or email catherine@justimaginefinance.com.au.