What is the First Home Guarantee Scheme in Victoria?
The First Home Guarantee Scheme in Victoria is designed to assist eligible first-time homebuyers in owning their first property sooner. It achieves this by allowing buyers to purchase a home with a deposit as low as 5% without the need for Lenders Mortgage Insurance. The scheme was initially introduced by the federal government in 2019 and is administered by the National Housing Finance and Investment Corporation (NHFIC). In 2022, it underwent a name change from the First Home Loan Deposit Scheme and saw an increase in the number of available places for scheme applicants, from 10,000 to 35,000.
In 2022, the scheme was also expanded to provide support specifically for single parents. Eligible single parents with at least one dependent child can access 10,000 Family Home Guarantees with a deposit of as little as 2%.
2023 Changes to the Scheme in Victoria
In the most recent 2023 Budget, the Federal Government announced significant changes to the First Home Guarantee Scheme in Victoria. These changes broaden the eligibility criteria to allow for more diverse housing arrangements. Starting from July 1, 2023, the definition of a couple will include not only married or de facto partners but also family members or two friends living together. This expansion means that ‘any two eligible individuals can now apply for the First Home Guarantee Scheme in Victoria. Additionally, the definition of a single parent will be expanded to include legal guardians such as aunts, uncles and grandparents from the same date.
These new rules also extend to previous homebuyers who have not owned a property in the past decade and make the scheme available to permanent residents in addition to Australian citizens.
How Does the Scheme Work in Victoria?
The First Home Guarantee Scheme in Victoria enables eligible first home buyers to purchase a home within a specific price range with a deposit as low as 5% (or 2% for single parent applicants). The NHFIC guarantees up to 15% of the property's value financed by a participating lender for single or couple applicants and up to 18% of the value for single parent applicants. Typically, without a 20% deposit, home buyers are required to obtain mortgage insurance, incurring additional costs.
Eligible borrowers in Victoria can also combine the First Home Guarantee Scheme with other government programs, such as the First Home Super Saver Scheme and state-specific first homeowner grants and stamp duty concession schemes.
Eligibility Requirements in Victoria
To take advantage of the First Home Guarantee Scheme in Victoria, applicants must meet several requirements, including:
Price Limits: The value of the residential property must not exceed the price caps set by the government for Victoria. As an example, the cap in Victoria is set at $800,000 for a capital city & regional areas at $600,000. Buyers of house-and-land packages should be cautious about exceeding this limit, as it may result in their application being rejected.
Property Types: The scheme allows flexibility in the type of property that can be purchased, provided it is residential. Eligible residential properties include existing houses, townhouses, apartments, house and land packages, land with a separate contract to build a home, and off-the-plan apartments or townhouses. Investment properties are excluded from the scheme, and applicants must intend to occupy the property.
Relationship Status: While previously only couples in married or de facto relationships were eligible for the First Home Guarantee, the 2023 changes now make it accessible to other individuals buying together, including siblings or friends.
Loan Requirements: Loans under the First Home Guarantee Scheme require scheduled repayments of both principal and interest for the full loan period, with limited exceptions for interest-only loans, primarily related to construction lending.
Income Thresholds: Eligibility for the scheme depends on income thresholds. Single individuals with an annual income of $125,000 or less and couples with a combined income of $200,000 or less, as indicated in their Notice of Assessment issued by the Australian Taxation Office, qualify.
Deposit Size: To be eligible, the minimum deposit size is 5% of the total property price. Single parents with children can have a deposit as low as 2%, while the maximum deposit size allowed is 20%.
Participating Lenders in Victoria
In Victoria, the NHFIC has authorized a panel of 32 participating lenders to offer the First Home Guarantee Scheme. Major bank lenders like the Commonwealth Bank and NAB are among them, along with non-major lenders such as Auswide Bank, Australian Military Bank, Bank Australia, Police Bank, Regional Australia Bank and Indigenous Business Australia to name a few.
If you have any further questions please do not hesistate to contact us at Ranges First National 9754 6111! We look forward to speaking to you.