The federal budget for 2021-22 has been announced. It outlines a number of steps to support home ownership and help small businesses recover from the coronavirus pandemic. Headlining the announcements is the Family Home Guarantee.
The Family Home Guarantee will give single parents the opportunity to get out of renting and into home ownership. It will enable single Mums and Dads to purchase a home sooner with a deposit of as little as 2 per cent. It’s not a grant. It’s a guarantee. All you do is front up with your 2% and borrow the remainder. It doesn’t have to be a ‘First Home’. The government will guarantee up to a maximum of 18 per cent of the property purchase price, allowing the applicant to get a loan without paying lender’s mortgage insurance. Why is the 18% important? Simple. Eighteen plus two is twenty. If you have that much deposit, you don’t need the lenders mortgage insurance, also known as LMI. Applicants must be Australian citizens, at least 18 years of age and have an annual taxable income of no more than $125,000.
And do you want my take on it? A 2% deposit is good. After all, saving up 5% is a toughie when you have little mouths to feed as well. Not paying LMI is also good, as that’s an easy $10,000 saving on even a modest purchase. There’s just one concern: if you think you might qualify now, act quickly. If you leave it too long, you’ll need 2% of a much higher purchase price, potentially. A little concept called ‘Supply and Demand’ potentially comes into play. There are just 10,000 guarantees available from July 1, 2021 for 4 years.
Tax cuts for more than 10 million people will benefit individuals and couples by up to $1,080 and $2,160 respectively, according to the Treasurer. He also hailed the success of last year’s First Home Loan Deposit Scheme and Homebuilder. These two measures have boosted first home buyer activity to the highest level in 15 years.
The FHLDS will be expanded for a second year, providing an additional 10,000 places in 2021-22. This one’s the First Home Owners Deposit Scheme. As with the new announcement, it’s a guarantee. It will continue for another year, with an additional 10,000 places.