Are you a single parent?
Have you always wanted to own a home but never really could save up the deposit?
You can now buy a home with as little as a 2% deposit, with the new Family Home Guarantee scheme introduced in the current 2021 budget.
From 1 July 2021, 10,000 Family Home Guarantees will be made available over four financial years and will provide eligible single parents with dependants the opportunity to build a new home or purchase an existing home with a deposit of 2 per cent, subject to the individual’s ability to service a home loan.
The government will act as a guarantor for up to 18% of the property price for those who qualify.
Who is eligible to qualify?
You can qualify if:
- You are a separated or divorced single parent with dependent children.
- You have an annual taxable income of less than $125,000.
- You have at least a 2% deposit, which is $10,000 for a property worth $500,000.
However, it’s not all rainbows and butterflies!
- There is a limit of 10,000 guarantees over four years, so you may have to act early to benefit from the scheme.
- If you buy a home with a 2% deposit, there are chances of negative equity (i.e. when the loan is higher than the value of the property) if the property prices fall over the next few years. Negative equity can cause you problems if you would like to refinance or sell soon.
- There are other hidden costs besides the deposit, including stamp duty, which may be as much as 5% of the property price.
- Although interest rates are low right now, there is no guarantee that there won’t be a rise.
It would help if you were prepared for all of it.
How can I be prepared?
The devil is in the details. That’s why you need a good mortgage broker who is an expert at understanding these details.
A mortgage broker will act in your best interest and provide you with the most suitable options. They are legally bound to do so as per the Best-Interests Duty act.
They will not only help you apply for the scheme but ensure that you’re getting the best deal from the bank as well.