With housing prices still rocketing out of control it’s a daunting task for single parents to get into their own property and secure a safe and stable home for their families. Luckily the federal government is looking to do something about it with a family home guarantee that allows single parents to apply for a home with only a 2% deposit.
The truth of the matter is that family dynamics and norms are changing. The typical Australian family now has a multitude of different looks and arrangements, something that can be a disadvantage for single parents compared to those with double incomes.
While the family home guarantee was put in place to ease the extreme property prices in 2021, there is now renewed motivation thanks to the Federal government announcing in the 2022 budget a bigger commitment to the plan, effectively doubling the number of applicants it would receive each year until June 2025.
Single parents who are struggling to save for an ever-increasing home deposit can find relief with the revised proposal to get a leg up onto the property ladder with a minimal down payment.
Eligible single parents can buy a residential property as an owner-occupier without the penalty of Lenders Mortgage Insurance and a deposit of just 2%.
So how exactly does the Family Home Guarantee work?
How the Family Home Guarantee works
The Australian government will be offering the remaining 18% as a guarantee, in order to bypass the expensive lenders mortgage insurance the bank demands for loan deposits under 20%. The difference in cost can be thousands of dollars which allows single parents the ability to make a minimal deposit without the extra expense that can put a home loan out of reach, especially as these costs are demanded upfront.
The offer is for both new and established homes although any extra costs (title transfers, conveyancing fees and property inspections) still need to be covered on top of the property purchase fee.
This is not only helpful for single parents buying their first home, but also for singles who had owned property with their previous partner and were forced to sell as part of their divorce, putting them in a difficult position to re-enter the property market with the reduced financial backing and zero equity.
Eligibility for the Family Home Guarantee
If you are a single parent with at least one dependent child, you can apply to access the low deposit scheme. This is regardless of whether you have owned property previously. This is a big help as many other grants are only available to first home buyers, excluding those now-singles who have previously held a title with their ex-partner which is an asset that cannot take advantage of to secure their next home purchase.
There are a few restrictions and eligibilities you need to be aware of.
The Australian Family Home Guarantee is available to:
- Australian citizens over 18-years-old
- Single parents with at least one dependent child
- Those who earned less than $125,000 (excluding child support payments) the previous financial year
- Ability to cover other upfront costs (stamp duty, title transfers) and have at least 2% deposit to put towards the loan
- Those buying residential property for the purpose of sole occupancy
When it comes to property types the scheme is very flexible on which properties are available, provided they are residential properties for occupancy. This covers an existing, established property such as a house, apartment or townhouse, a house and land package, land with an independent builder’s contract as well as off the plan property purchases.
Can I buy any home with the Family Home Guarantee?
There are price caps in place to prevent overstretching your budget and keeping home purchases within an affordable bracket for repayments (based on the income cap mentioned ineligibility).
These vary by state in order to try to offer single-parent families a price range that offsets the current market value - ie, those states and cities where housing prices are excessive allow a bigger price cap so a family can look to purchase a quality, safe home.
Keep in mind that because property prices can change suddenly there is always the chance that Family Home Guarantee caps will change too, so always make sure you have the most current information for your state before you start your property search.
How do I apply for the Family Home Guarantee?
If you are eligible your mortgage lender will handle your paperwork as part of your loan. Be sure to mention your desire to be part of the scheme before you commit to a lender as not all will be eligible to apply. Some less traditional or smaller lenders may not be able to put your application forward.
You don’t need to repay this guarantee later, however, you will need to cover the full price of the property over the course of your loan. A disadvantage of the scheme is you need to factor in the extra costs of interest for a larger loan. So while you do not have to pay as much upfront, your loan will be for the full property price.
i.e. Someone who has a 20% deposit takes out a loan for 80% of the agreed property price and pays interest on the 80% for the life of the loan. While a single parent using the Family Home Guarantee pays 2% now and takes out a loan for 98% of the agreed property price, committing to repaying interest on the 98%.
Always check your eligibility and the availability of any grant or scheme before you lock in your purchase as it can make a big difference to your ability to pay your mortgage if for any reason you are not accepted.
