Almost everyone dreams of buying and owning a home. You can't blame them since it's a good financial investment and it gives the owner a sense of achievement, security and stability. However, this feat can be challenging, especially for first home buyers. After all, there are so many processes and regulations that you need to know to save money or avoid costly errors. Saving for your first home is also difficult, especially with the continuously increasing cost of living.

The good news is, first-time homebuyers can take advantage of several government grants designed to attract newcomers to the real estate market. Here’s a quick rundown of some first home owner grants in Australia for 2022.

First Home Guarantee

Formerly known as the First Home Loan Deposit Scheme, the First Home Guarantee allows first-time home purchasers to qualify for a mortgage with as little as a 5% deposit without incurring Lenders Mortgage Insurance (LMI) fees.

A borrower often needs a 20% deposit to avoid spending thousands in LMI costs. However, even with a 5% deposit, you can avoid LMI costs because the government will guarantee up to 15% of the property's worth under the scheme. In essence, the government will function as a mortgage insurance. If a borrower puts down 5% of the property value, the government guarantees 15% of the property value, reducing the risk to the lender to the same level as if the borrower put down 20%.

According to the scheme's highest regional price cap, first-time purchasers can save anywhere from $10,000 to $30,000 in LMI costs. For the fiscal years 2021-2022, 10,000 scheme spots have been made available beginning 1 July 2021. But for 2022-2023, the First Home Guarantee now offers 35,000 total spots each year.

To be eligible for the First Home Guarantee, first-time purchasers must meet several requirements:

A minimum of 5% deposit is required (most lenders require the deposit to have been accumulated through genuine savings).

Only Australian nationals over the age of 18 with a valid Medicare card are eligible. Permanent residents are not allowed to apply.

Single first-time buyers with an annual income of up to $125,000 or couples with an annual income of up to $200,000 are eligible. The income from the year before to the year in which the loan is taken out will be considered.

Couples who are married or in a de facto relationship are eligible for the program. Siblings, parents and children, and friends who buy together are not eligible.

Applicants must be first-time home buyers who have never owned or had an interest in a residential property before, either alone or together with another person. This covers residential strata and company title properties, regardless of whether they were purchased as an investment or used as a primary residence.

Applicants must intend to move into the property and live there as their primary residence (they must be owner-occupiers).

When the loan-to-value ratio exceeds 95% of the property worth, first-time buyers must also show proof of finances to cover stamp duty, legal fees, bank fees, and other costs.

Qualified home buyers can buy the following types of properties under the First Home Guarantee grant:

A house, townhouse, or apartment that already exists

A land and house package

A piece of unoccupied property with a separate contract to build a house

A pre-construction apartment or townhouse

Due to the limited amount of spots available each year, applicants should submit their application as soon as possible to qualify. It is also recommended that first-time home buyers work with mortgage brokers who can guide them throughout the process.

Family Home Guarantee

Under the Family Home Guarantee scheme, a single parent with children can build a new home or buy an existing one for as little as 2% of the property value, without having to pay Lenders Mortgage Insurance (LMI).

As mentioned above, LMI is usually charged on deposits of less than 20%. But under this scheme, a borrower can pay 2% of the deposit then the government will guarantee the remaining 18%.

Initially, the scheme had a total of 10,000 spots available, but starting 1 July 2022, the government will add 5,000 new spots every year. The Family Home Guarantee is in effect until June 30, 2025.

Single parents with children are eligible for the Family Home Guarantee. Here are the other requirements:

• Your taxable income cannot be more than $125,000. The income cap does not apply to child support payments.
• Those who previously owned a home are qualified, provided that you can’t currently own a property.
• Applicants must be Australian nationals with a minimum age of 18 years. Permanent residents are not allowed to apply.
• A minimum deposit of 2% of the property value is required. You will not be eligible for the scheme if your deposit is greater than 20%.

Eligible applicants can buy any of these types of house under this scheme:

• Existing house
• Townhouse
• Apartment
• Land and house package
• Land and a separate contract for the construction of your home

As usual, it’s best to talk to your broker for more information on this scheme.

Regional Home Guarantee

The Regional Home Guarantee is a supplement to the current First Home Loan Deposit Scheme. When you borrow more than 80% of the property's value, LMI is frequently required. However, under this scheme, you can borrow up to 95% of the property value without paying LMI as the government will guarantee 15% of the amount you borrow. In short, you can buy or develop a home in a regional area with a deposit as low as 5% of the property value and avoid paying Lenders Mortgage Insurance (LMI).

The new Regional Home Guarantee will provide up to 10,000 places per year from 1 October 2022 if the legislation passes. Here are some criteria to qualify:

• You must be a first-time home buyer or have not owned a home in the last 5 years
• Permanent residents can apply
• You must purchase or construct a new home in certain regional locations

Let us help you purchase your first home

We at Fastgrow Finance can help you get the best financial solutions for you to help you achieve your dream home. We understand the ins and outs of the market and we keep updated with all the national and global events that can have an impact on you. This is so we can provide you with reliable services and help you achieve your financial goal.

Please get in touch with us directly. Our knowledgeable advisors and trusted brokers will work with you to determine your objectives and screen and help select a provider that meets your needs.

Contact us through the following channels:

• Phone: (02) 9630 3142
• Email: [email protected]