Family Home Guarantee Scheme

The Family Home Guarantee is part of the Home Guarantee Scheme, which is an Australian Government initiative run by Housing Australia. The FHG is specifically designed to help eligible single parents and single legal guardians buy a property with a deposit smaller than 20% of the loan value and letting them off the hook on paying lenders mortgage insurance (LMI).

The FHG can be used by eligible single parents and legal guardians to assist them in buying one of several different property types including:

• New homes
• Existing homes
• Townhouses
• Apartments
• Land packages.

It’s worth noting, however, that the FHG is only for by those looking to buy an owner-occupied residential property – investment properties are not eligible for purchase via the FHG.

Successful FHG applicants will have up to 18% of their home loan guaranteed by the Federal Government. When this guarantee is combined with the applicant’s own minimum deposit requirement of 2%, in the lender’s eyes it’s essentially as if the applicant had a 20% deposit.

With one fifth of their new home loan guaranteed via the combination of their saved deposit and the FHG, successful applicants won’t have to pay LMI. This in turn means their home loan repayments will be cheaper and their long-term home loan costs will be lower than if they also had to pay LMI.

There are limits on the purchase price of the property you’re looking to buy via the FHG, varying by state/territory. For first home buyers living in a state and not the ACT or the Northern Territory, there will also be different price caps for buying in a capital city or regional area versus buying elsewhere in the state.

Some regions may be excluded, instead being eligible for the Regional First Home Buyer Guarantee (RFHG).

The property price caps for the FHG are as follows:

*The applicable regional centres are Newcastle and Lake Macquarie, Illawarra, Geelong, Gold Coast and Sunshine Coast.

Unlike the First Home Guarantee and Regional First Home Buyer Guarantee, which allow for joint applicants, you must be a sole applicant in order to be eligible for the Family Home Guarantee. Additionally, you must be:

• An Australian citizen or Australian permanent resident at the time you enter the loan
• 18 years of age or older
• Be looking to purchase a home with a value under the relevant property price caps for your state and area
• Earning no more than $125,000 a year
• Applying through an authorised lender or a mortgage broker working as a representative of an authorised lender
• Looking to be the owner-occupier of the property in question
• Not currently owning property or intending to own a separate property.

To be considered an eligible single parent or eligible single legal guardian, you must:

• Be single (i.e. without a partner, or divorced)
• Have at least one dependent child or a person in receipt of a disability support pension who lives with you
• Be able to show that you’re legally responsible for the day-to-day care, welfare and development of the dependent in question.

Note that for the purposes of assessing your sole or joint income, the lender will look at your most recent Notice of Assessment (NOA) from the Australian Taxation Office (ATO), showing your taxable income for the relevant financial year.

To apply for the Family Home Guarantee, you’ll need to apply for a home loan as per usual, but specifically through one of the federal government’s nominated participating lenders. As of November 2024, the panel of chosen lenders is comprised of:

• Australian Military Bank
• Australian Mutual Bank
• Auswide Bank
• Bank Australia
• Bankfirst
• bankSA
• BankWAW
• Bank of Heritage Isle
• Bank of Melbourne
• Bank of us
• Bendigo Bank
• Beyond Bank
• Border Bank
• Commonwealth Bank
• Community First Bank
• Credit Union SA
• Defence Bank
• Firefighters Mutual Bank
• G&C Mutual Bank
• Gateway Bank
• Great Southern Bank
• Health Professionals Bank
• Indigenous Business Australia
• Illawarra Credit Union
• IMB Bank
• MyState Bank
• NAB
• Newcastle Permanent
• People’s Choice
• Police Bank
• QBANK
• Queensland Country Bank
• Regional Australia Bank
• St.George
• Teachers Mutual Bank
• The Mutual Bank
• UniBank
• Unity Bank
• Westpac.

You can also choose to apply for your home loan via a mortgage broker acting as a representative of one of the above Government-approved lenders.

The good news is that your lender or mortgage broker will fill out and submit your FHG application for you as part of your home loan application. Just flag upfront that you’re looking to apply for the FHG, and your lender or mortgage broker will be able to assist.

Keep in mind that whichever lender you’re applying with, you’ll still need to meet their regular lending criteria whether you’re also applying for the FHG or not. The lender will conduct the same assessment of your finances either way, with the only difference being the portion of your home loan that’s guaranteed.

If you’re not eligible for the FHG, but the benefit it provides is something you’re keen on, a guarantor could help you achieve a similar outcome. A guarantor is someone you know (usually a close family member) who already owns a property, and voluntarily uses some of their home equity to help secure your home loan.

While this can function in a similar way to the FHG and help you avoid paying LMI by boosting your saved deposit, there are some risks. If someone goes guarantor on your home loan, that means they’ll assume responsibility for making your home loan repayments if you can’t.

This could damage their financial situation, cause them to enter mortgage stress, or even end up with them having to sell their property to meet both your repayments and their own.

So be sure both you and your prospective guarantor fully understand the risks and ramifications involved before making any firm commitments – otherwise it could potentially end up really putting a strain on your personal relationship with them.

If you simply don’t have the saved deposit or the means necessary to afford the properties you’re eying off, you may need to broaden your search to smaller or further-out properties. They’ll likely be at least a little bit cheaper (all other things being equal), and a cheaper property means a smaller home loan, and subsequently a larger (relatively speaking) home loan deposit.

It’s not necessarily the most exciting suggestion, but if you’re truly out of luck when it comes to being approved for a home loan, you may simply need to save a larger deposit. This could take some time and have an impact on your current lifestyle, but it may be your most reliable and foolproof option.