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FIRST HOME BUYERS REJOICE!
Australian first home buyers around the country are cracking open their piggy banks - the federal government has introduced a new scheme to accelerate the process of purchasing a first home.
In the past, buyers would typically require around a 20 percent deposit to secure their desired property. However, the Australian Government’s First Home Buyer Guarantee (FHBG) is allowing eligible applicants to purchase a home with as little as a five percent deposit, while avoiding the need to pay Lenders Mortgage Insurance (LMI).
Administered by the National Housing Finance and Investment Corporation (NHFIC) on behalf of the Australian Government, this initiative is designed to assist Aussie first home buyers to buy or build their first home sooner.
The scheme works by guaranteeing participating lenders up to 15 percent of the value of the property financed by a FHBG home loan.
Upon the announcement of the scheme, the federal government stated that 35,000 guaranteed loans will be awarded to eligible Australians each financial year. On November 24, 2022, it was announced that approximately 1,100 unused loans from the 2021-2022 financial year will be rolled over into the following year. This brings the total number of available guaranteed loans to over 36,000 for the 2022-2023 financial year.
Properties or homes must be eligible for buyers to be accepted for the FHBG, with certain properties being permitted. All properties must be residential in nature, and must consist of:
An existing house, townhouse or apartment;
A house and land package;
Land and a separate contract to build a house; or,
An off-the-plan apartment or townhouse.
The FHBG can also be used alongside first home owner grants, stamp duty concessions and the federal government’s First Home Super Saver Scheme, allowing Aussies to access voluntary super contributions to assist in funding their new homes.
Applicants must meet strict criteria to be accepted for the FHBG. These conditions include:
Being an Australian citizen* aged 18 years and over(permanent residents excluded);
A taxable income of up to $125,000 per annum for single applicants for the previous year (as shown on a Notice of Assessment issued by the Australian Taxation Office);
A taxable income of up to $200,000 per annum combined for couples* for the previous financial year (as shown on a Notice of Assessment issued by the Australian Taxation Office);
An existing deposit of between five and 19 percent having already been saved*;
The intention to purchase the home as an owner-occupier*; and,
Not having previously owned or had an interest in property, separately or jointly with someone else, including owning or having owned land in Australia.
Buyers are responsible for ensuring scheduled repayments on the principal and interest of the loan for the full period of the agreement under the FHBG.
There is a maximum of one FHBG permitted per buyer in their lifetime, and different property thresholds apply for each Australian state and territory. Currently, Victorian property thresholds are $800,000 for homes in the capital city or regional centres (with a population of over 250,000 people), with the rest of Victoria’s threshold sitting at $650,000.
Hayden Groves, president of the Real Estate Institute of Australia (REIA), says the FHBG is a huge win at a pivotal point in time.
“Setting up Australians into home ownership is a critical measure at this stage of Australia’s political and economic cycle, and is applauded by REIA,” says Mr Groves.
As well as helping address housing affordability issues in Australia, FHBG initiative is expected to work wonders for the country’s economy, with helping to drive down inflation and generating billions in sales activity among additional benefits.
All applications made between July 1, 2022, and June 30, 2023 will be assessed for the 2021-2022 financial year.
To apply, you must go through a participating lender, with a full list of lenders available at www.nhfic.gov.au.
Underlying terms, conditions and legal obligations apply to government initiatives. If you are considering applying, conduct your own research, and speak to your lender or mortgage broker to ensure you are well informed.
