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One-Third of first home buyers embrace guarantee schemes

Know someone looking to purchase their first home? A recent report confirms that younger buyers are getting a head start in home ownership through low deposit schemes.

First home buyers are paying little heed to headlines cautioning them about the years it takes to save a deposit. Instead, they are turning to guarantee schemes that enable them to enter the real estate market with just a 5% deposit, all without incurring the expenses of lender’s mortgage insurance (LMI).

The National Housing Finance and Investment Corporation (NHFIC), responsible for administering the federal government’s First Home Guarantee schemes, reports that in the financial year 2022/23, nearly one-in-three first home buyers utilized the guarantee schemes. This is a significant increase from the one in seven recorded the previous year.

Altogether, during the last financial year, 41,700 homebuyers accessed the real estate market with the assistance of guarantee schemes, owing to a rise in the number of available slots.

Younger Australians are entering the housing market

What’s particularly exciting about NHFIC’s research is that it demonstrates that these schemes are facilitating younger buyers in breaking into the property market. In 2022/23, more than half of all spots in the First Home Guarantee and Regional First Home Buyer Guarantee were taken up by individuals under 30 years old. Additionally, there has been a fivefold increase in the number of buyers aged 18-24.

Key workers are acquiring homes with a mere 5% deposit

The low deposit schemes are also aiding an increasing number of essential workers such as educators, healthcare professionals, and social workers in realizing their homeownership dreams. In the past financial year, approximately 7,721 guarantees were granted to key workers, which is excellent news for these crucial contributors to our community.

Dispelling the myth of low deposits

The First Home Guarantee has, on occasion, faced criticism, primarily concerning the potential risks associated with purchasing a home with only a 5% deposit. This can translate into taking on a larger loan with higher monthly payments. However, data from NHFIC suggests that this has not proven to be a significant issue. Fewer than 0.1% of homeowners utilizing the schemes have fallen behind on their loan repayments, a rate lower than the market average for all buyers with a low deposit loan. Furthermore, nearly 10,000 scheme borrowers (over 12% of total guarantees issued to date) have successfully transitioned out of the scheme, with most of them having accrued sufficient equity to achieve a loan-to-value ratio (LVR) of less than 80%.

Could you be eligible for a 5% deposit scheme?

If you’re a first home buyer struggling to save a 20% deposit, it’s reassuring to know that there is a pathway to home ownership that can expedite your journey to having a place of your own. It can also help you avoid the costs associated with LMI, which can range from $4,000 to $35,000, depending on the property’s price and the size of your deposit.

Certain conditions apply to the 5% deposit schemes. However, thanks to new regulations, you can team up with a sibling or friend and still qualify for this valuable financial assistance. Given the rising property values in many Australian markets, time is of the essence.

Why don’t you contact us today on 1800-E-LOANS to see if you can purchase a home with a 5% deposit and avoid LMI fees.

1800 35 62 67

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

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