On Tuesday the 11th of May 2021, our treasurer Josh Frydenberg will announce a new program to help separated and divorced parents buy a home of their own – the Single Parent Family Home Guarantee.
Close to 50% of single-parents families rent from private landlords which is double the rate for dual-parent families.
The Australian Government says that around 125,000 single parents may be eligible for this Family Home Guarantee program which is made up of around 105,000 single mums and 20,000 single dads.
How does the Single Parent Family Home Guarantee work?
There is said to be 10,000 spots available per year, with the scheme to commence on 1st July 2021. There has already been talk of extra spots being added to the program should the 10,000 spots be exhausted within the 4 years. We’re eagerly awaiting the final details on whether these spots are going to be per state or will be divvied up across Australia.
This program is based on the First Home Loan Deposit Scheme and has the same property price caps. However, unlike that scheme, this is not limited to being a first home buyer, recognising that many single parents may have previously been home-owners.
The Single Parent Family Home Guarantee will allow single parent families to purchase with only a 2% deposit not the general 5% oor more usual 20% deposit that is needed to avoid Lenders Mortgage Insurance (LMI).
Who is eligible?
- Needless to say the applicant must be a single parent to dependant children.
- The applicant must be an Australian Citizen and 18 years or older.
- The applicant must meet the income threshold $125,000 per annual
- The applicant cannot currently own a property, however can be eligible if you have previously owned a property. (Despite news reports this scheme is not limited to first home buyers)
- The applicant will need to have a minimum of 2% deposit of the purchase price. (The government will guarantee up to 18% of the property purchase price, so that you do not need to pay LMI)
- The applicant will need pass the Owner Occupier Test meaning that the single parent MUST be the only person listed on the title and the loan, and MUST live in the home.
- The applicant can buy a NEW or Existing dwelling property up the the price caps listed.
Can both parents apply for the Family Home Guarantee?
It has been said that both ex-partners of the same children can apply for this scheme according to the spokesperson for the Assistant Treasurer.
You wont need to prove 50% or more care of the children however you will have to demonstrate car/custody of the children. It has been suggested that at least 10% of care may be required.
To what age are they classing dependant children?
- under 16 where the adult is legally responsible for child’s day to day care, welfare and development or
- aged 16-21 and wholly or substantially dependent on their parent and does not earn more than $6,403 in a financial year.
Family Home Guarantee Price Caps
Which banks and lenders can provide Single Parent Family Home Guarantee loans?
There are around 27 lenders who are taking part in this scheme. Luckily, if spots fill up with one lender we can advise who has spots left.
The Pros and Cons of the Single Parent Family Home Guarantee
- Single parents exiting a relationship with some savings, or settlement of splitting the assets, and in permanent employment, will be able to use this program to buy a home. No need to go into the rental cycles.
- Save thousands $$$$ on Lenders Mortgage Insurance
- Only need 2% deposit
- The single parent/applicant will still require to meet the loan servicing requirements with he lender to be eligible for this program.
- You may not need to pay LMI, but you will still be required to repay the 18% the government ‘guarantees’
- Most single parents will simply not have enough secure income from employment to get a loan.
Will this scheme help you?
We’ll get any further details on Tuesday after the budget is announced and details are confirmed.. If this gets snapped up anything like the FHLDS you will want to get in early. If you or someone you know wants to get more info contact us at the office.