If you’re looking to buy your first home, there’s a scheme you should know about: the Home Guarantee Scheme (HGS). It could significantly reduce the time it takes to purchase your own place. Here’s how it works:
Saving a 20% deposit for a first home can be challenging, especially with the current cost of living. On average, it now takes 10.6 years to save for a first home deposit, according to CoreLogic.
However, with the HGS, you might be able to buy with just a 5% deposit without paying lenders mortgage insurance (LMI). Since its launch in 2020, 193,000 first home buyers have used the HGS to enter the market.
How the Home Guarantee Scheme Works
Instead of providing a cash payment like the First Home Owner Grant, the HGS involves the federal government guaranteeing your home loan. This benefits first home buyers in two ways:
- Lower Deposit Requirement: Lenders can offer home loans with just a 5% deposit under the HGS. While some banks already offer this, typically, a deposit below 20% requires paying LMI, which can be costly.
- No LMI: With the HGS, buyers aren’t required to pay LMI, as the government acts as the guarantor for your mortgage.
Three HGS Options
The HGS caters to three types of buyers:
- First Home Guarantee: Helps eligible first home buyers purchase a home sooner. There are 35,000 places available this financial year.
- Regional First Home Buyer Guarantee: For those buying in regional areas, with 10,000 places available this financial year.
- Family Home Guarantee: For single parents, allowing them to buy with as little as a 2% deposit without paying LMI. There are 5,000 places available for the 2024-25 financial year.
Increasing Popularity of the 5% Deposit Scheme
Five years ago, about one in ten first home buyers used the HGS. Today, it’s closer to one in three. This increase isn’t just due to rising property prices, higher interest rates, or cost of living pressures. The First Home Guarantee and Regional First Home Buyer Guarantee have expanded to include friends, siblings, and other family members buying together, as well as non-first-home buyers who haven’t owned property in Australia in the past ten years.
The Fine Print
The 5% deposit scheme has eligibility conditions, mainly related to income and the maximum price of the home. Not all lenders participate in the HGS, so options may be limited.
Get Started
If you’re interested in fast-tracking your path to home ownership, the 5% deposit HGS could be the solution. Talk to us to find out if you’re eligible and discover the lenders that can help you get started.