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BUDGET UPDATE: Home deposits as low as 2%? The proposed measure to support single mothers and parents

At present, the Australian housing market presents a major challenge for the Federal Government. There is a significantly high demand for acquiring housing and property, whilst very little supply is available. This is especially problematic for disadvantaged members of society, such as single parents (especially mothers) with children – balancing supporting a household by themselves, working to pay for necessary living expenses and managing a dependent child/children is extremely physically taxing and financially exhausting, and leaves little room to accumulate savings to invest in permanent housing[1].

The 2021-22 Federal Budget, released on 11 May 2021, aims to implement steps to address this issue. The Government states that one of its aims is promoting and supporting home ownership, especially for single parents with dependents – proposing to do so through expansion of its Family Home Guarantee scheme[2].

This article examines the scheme, and some of the critical components and eligibility requirements that applicants should consider when attempting to apply for the scheme.

Family Home Guarantee Initiative

Commencing on the 1st July 2021, the Federal Government has expanded places in the Family Home Guarantee scheme by 10,000 places over four years[3].

This scheme is operated by the National Housing Finance and Investment Corporation (NHFIC) on the Federal Government’s behalf and is targeted towards single parents with children/dependents – paving a way for them to build a new home or purchase one already constructed.

The scheme allows for eligible applicants to apply for a loan to purchase an eligible property through a participating lender. The NHFIC guarantees to the lender up to 18% of the property value – with the applicant needing only to be eligible for the program and to make a deposit of 2% of the property’s value.

In order to be eligible for this guarantee, the relevant property for purchase must be an eligible property under the scheme.

Eligible properties will be residential property (as defined under the scheme) – often including:

  • previously-constructed houses;
  • apartments;
  • off-the-plan arrangements; and
  • house/land packages.

Secondly, the prospective applicant must meet the eligibility criteria as assessed at the time they enter into the loan. These criteria include:[4}

1. You must be an Australian Citizen who has attained 18 years of age.

Note that if you are a permanent resident of Australia, but are not a citizen, you will be ineligible for this scheme.

2. The applicant must be a single parent with at least one dependent, and a taxable income not exceeding $125,000 per annum for the previous financial year.

Importantly to note, the cap on the total taxable income does not include any child support payments paid to the applicant to be spent for the benefit of the child/children.

3. Applicant must be solely named on the loan and title certificate

No other person can appear as joint owner of the property, or jointly named as borrower on the loan. If someone else is co-listed on the documents, the applicant will be ineligible for the benefits of the scheme.

4. Applicant is the natural or adoptive parent of a “dependent” child

This is assessed with reference to the Social Security Act 1991 (Cth) section 5. This requires consideration of whether the applicant has legal responsibility for the child (either sole or joint responsibility with some other person) – being responsible for their “…care, welfare and development…”[5}.

5. Applicant must have a deposit ready of at least 2%, but not exceeding 20%, of the total value of the eligible property

If the applicant has a deposit falling outside of the prescribed boundaries or has no deposit at all, the loan cannot be covered by the Family Home Guarantee.

6. Applicant must purport to be the owner-occupier of the property they wish to purchase

For members of the Australian Defence Force, this element will not apply if their service duties preclude them from being owner-occupiers.

7. Applicant has no current freehold, lease or company title interests in Australian real property

The applicant must either be buying their first home or purchasing a new home whilst not currently having ownership over a home.

8. Applicant has ability to meet the loan’s repayment obligations

Eligible loans will have a duration not exceeding 30 years, and the applicant must have the ability to make repayments on the principal and interest as they fall due.

9. The property’s value does not exceed the eligibility threshold

For a full list of the relevant threshold limits for property values as it relates to each state, click here.

It is expected that up to 105,000 of the 125,000 single parent households will be eligible to access this scheme[6], which, as the Government outlines, should provide an avenue to assist these vulnerable people to own their own homes[7].

If you are a single parent who is interested in applying for a loan under this scheme and would like to know your legal position, or you would like legal assistance with your property law matter, the friendly team at Corney & Lind Lawyers are here to help. Contact us today on 07 3252 0011, or email us at enquiry@corneyandlind.com.au

This article was written by Jackson Litzow (Law Clerk)

FOOTNOTES

[1] Jessica Sier, ‘Australia’s housing crisis: it’s one of the most unaffordable in the world, so how is the Coalition going to fix it?’ The Guardian (News Article, 11 May 2021) <https://www.theguardian.com/australia-news/2021/may/11/australias-housing-crisis-its-one-of-the-most-unaffordable-in-the-world-so-how-is-the-coalition-going-to-fix-it>.

[2] Commonwealth of Australia, ‘Budget 2021-22 Overview’ Budget 2021-22 (Web Page, 11 May 2021) <https://budget.gov.au/2021-22/content/overview.htm>.

[3] Australian Government, ‘First Home Loan Deposit Scheme’ Natonal Housing Finance and Investment Corporation (Web Page, 8 May 2021) <https://www.nhfic.gov.au/what-we-do/first-home-loan-deposit-scheme/>; Commonwealth of Australia, ‘Budget 2021-22 Overview’ Budget 2021-22 (Web Page, 11 May 2021) <https://budget.gov.au/2021-22/content/overview.htm>.

[4} Australian Government, ‘Family Home Guarantee Fact Sheet’ National Housing Finance and Investment Corporation (Fact Sheet, May 2021) 1-2 <https://www.nhfic.gov.au/media/1672/210521-fhg-fact-sheet.pdf>.

[5} Australian Government, ‘Family Home Guarantee Fact Sheet’ National Housing Finance and Investment Corporation (Fact Sheet, May 2021) 1 <https://www.nhfic.gov.au/media/1672/210521-fhg-fact-sheet.pdf>; Social Security Act 1991 (Cth) s 5.

[6] Kelsie Iorio, ‘HomeBuilder and New Home Guarantee extended, 2 per cent deposit Family Home Guarantee Introduced in 2021-22 federal budget’ ABC News (News Article, 12 May 2021) < https://www.abc.net.au/news/2021-05-12/federal-budget-housing-affordability-first-home-buyers-grants/100132472>

[7] Commonwealth of Australia, ‘Budget 2021-22 Overview’ Budget 2021-22 (Web Page, 11 May 2021) <https://budget.gov.au/2021-22/content/download/glossy_overview.pdf>.

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