You might have heard about the government’s 5% Deposit Home Guarantee, a scheme that would allow people to purchase their first home with a fraction of the deposit currently required. For many single mums, this could be a game-changer. Here’s the Guarantee explained, and the discussions you should be having.
The Federal Government has announced it will roll out its expanded First Home Buyers Guarantee from October, three months earlier than promised, as well as expand its eligibility.
The 5% Deposit Home Guarantee allows people purchasing their first home to secure a property with a deposit as low as 5 per cent, without paying lenders’ mortgage insurance (LMI). For many buyers, skipping LMI can mean avoiding an additional cost of tens of thousands of dollars.
The reforms that have now been announced remove the annual cap on how many people can use the guarantee and scrap income thresholds that previously restricted access. Property price caps have also been increased significantly to better reflect real market conditions. In Melbourne, that cap has risen from $800,000 to $950,000, with similar increases across other regions.
The scheme is expected to deliver an extra 20,000 places in the first year.
According the government, the scheme will give aspiring homeowners an earlier shot at securing a place in the market, but housing advocacy group Everybody’s Home says that while the expanded guarantee is “not a bad thing,” it falls far short of addressing Australia’s housing affordability crisis.
Find out more about the 5% Deposit Home Guarantee here.
Discussion points
Thinking of applying for the 5% Deposit Home Guarantee? As always, before making any big financial decision, it’s important to have discussions with advisors and people you trust. Here’s some things you might like to discuss to determine if the scheme is best for you:
- The lower your deposit, the higher your loan and the more you will pay in interest.
- If property prices fall, you could end up owing more than your home is worth.
- The sooner you’re in a property you own, the more you save on rent.
- Your current and projected financial situation and your tolerance of risk.
