Home loans for single parents

 

The Australian government are aiming to help 10,000 single parents attain a home loan between 1 July 2021 to 30 June 2025. The Family Home Guarantee will allow single parents to get onto the property market, so long as they can provide proof that they will be able to repay the loan.

Should any single parent in Australia want to know more about the scheme, what’s involved, and how to find home loan help, here is everything to know.

Home loans for Single Parents

The Family Home Guarantee allows single parents the chance to attain a property with just a 2% deposit. Unlike other property deposits, which require between 5 and 10%, this enables single parents to borrow the other 98%, as long as they can prove the ability to pay their mortgage repayments.

While most couples can achieve a 5 to 10% deposit together, for single parents it isn’t as easy. Therefore, the government acts as the guarantor so that a single parent can buy a property more easily.

Any single parent who aligns with the following requirements is eligible for the scheme:

  • – Be an Australian citizen – not just a resident.
  • – Have dependent children – who are natural or adopted children.
  • – Align with the income cap – an annual taxable income of $125,000 or less.
  • – Purchasing or building a new home – does not have to be their first home purchase.
  • – Is single – a person single but not divorced is not eligible until divorced.

If you have previously owned a home, you can still be eligible. As long as the single parent does not have a freehold interest in property in Australia, a lease of land in Australia, or a company title interest in land in Australia, they are eligible.

Anyone that is still unsure if they are eligible should seek advice from a professional advisor.

Seeing as many government schemes have price caps, some regions might not be applicable for this scheme. If the price exceeds the cap, it is a good idea to look elsewhere for a property that fits within the pricing category.

The regional property price caps are as follows:

  • SW – $800,000
  • NSW (centre) – $800,000
  • NSW (rest of state) – $600,000
  • VIC (city) – $700,000
  • VIC (Geelong) – $700,000
  • VIC (rest of state) – $500,000
  • QLD (city) – $600,000
  • QLD (centre) – $600,000
  • QLD (rest of state) – $450,000
  • WA (city) – $500,000
  • WA (rest of state) – $400,000
  • SA (city) – $500,000
  • SA (rest of state) – $350,000
  • TAS (city) – $500,000
  • TAS (rest of state) 0 $400,000
  • ACT – $500,000
  • NT – $500,000
  • Jervis Bay and Norfolk Island – $550,000
  • Christmas Island and Cocos Island – $400,000

Knowing who are eligible single parents is an important step in the process to attain a home loan as a single parent in the housing market. However, there are certain property types that are and are not eligible for the home loan deposit scheme.

The Family Home Guarantee makes single parents eligible to purchase the following types of property:

  • – An existing house, apartment, or townhouse
  • – A house and land combination package
  • – Land with a separate contract to build a home
  • – An off-plan apartment or townhouse

Now knowing the price caps and eligible property types, it is useful to use the postcode search tool to check the prices in the desired area.

The biggest benefit of using the Family Home Guarantee scheme is avoiding the lender’s mortgage insurance (LMI) charge.

LMI protects lenders if they cannot repay the loan and their mortgage repayments. It can sometimes cost thousands or tens of thousands of dollars.

Under the Family Home Guarantee, a lender can deposit 2% and avoid the charge. This is due to the government effectively acting as a guarantor, who will back up the lender applying to purchase their own home.

Although there is a huge benefit for an eligible single parent when using the home loan deposit scheme, there are also some risks to know about. The most obvious risk is that with a 2% deposit, the single parent will have very small equity of the property. The main risk of such a small deposit is if the property lowers in value, then the lender could end up in debt as opposed to profit. The debt could outweigh their deposit amount and therefore, put the lender at a big financial loss.

Any single parent that pays their home loan repayments has a reduced worry as they will be building their equity the longer they pay.

Another risk is that a lender’s interest rate will be much higher with a 98% deposit. With a larger deposit, the lender pays less of their own money upfront. The smaller the deposit is, the more money the lender has to borrow, which will hike up the interest rate.

Lastly, there are some federal risks involved. Although the Family Home Guarantee aims to support those with a single parent home loan, they cannot be legally responsible and make payments on behalf of the single parent. Should a single parent lack the ability to make the repayments and incur debt, then they will need to sell the property in order to recover their debt.

There is a limit of 10,000 single-parent home buyers who can be accepted for the Family Home Guarantee scheme. Or, 2,500 per year.

To apply to the scheme, single parents must submit an application through the National Housing Finance and Investment Corporation (NHFIC).

Thereafter, accepted single parents will need to apply for a loan with banks that are also taking part in the scheme. The participating bank lists are below:

  • – Australian Military Bank
  • – Bank Australia
  • – Bank First
  • – Bank of Us
  • – Bendigo Bank
  • – Commonwealth Bank
  • – Community First Credit Union
  • – Defence Bank
  • – Firefighters Mutual Bank
  • – G&C Mutual Bank
  • – Gateway Bank
  • – Great Southern Bank
  • – Health Professionals Bank
  • – Indigenous Business Australia
  • – MyState Bank
  • – NAB
  • – People’s Choice
  • – QBank
  • – Regional Australia Bank
  • – Teachers Mutual Bank
  • – The Mutual Bank
  • – UniBank
  • – WAW

To increase the chance of a home buyer’s home loan being accepted as a single parent, here are some useful tips.

  • – Improve credit score. A good credit score and a positive credit history will increase home loan eligibility for a single parent.
  • – Use a relevant credit provider. A relevant credit provider will ensure to maximise the chance of being accepted for a home loan as they will aim to support single parents.
  • – Save a good deposit. It is a good idea to save as much as possible for the home deposit. It is a good idea to use government assistance. Some further savings tips include:
    • Government assistance. Single parents are often eligible for the federal government schemes – Family Tax Benefit A & B, Parenting Payment and the Child Care Benefit. Hence, using assistance can help maximise finances and aid towards a bigger deposit.
    • Look into borrowing power. The more money a single parent earns, the more money they are eligible to borrow. Knowing how much an individual can borrow will help the property search process and the home buyer understands where they should look for a property.
    • Budget effectively. To maximise savings, it is advised to budget well. Doing so will ensure that as much money can go into savings as possible.
    • Get a savings account. Speaking of savings, it will benefit a single parent to get a savings account. High-interest savings accounts will maximise the monthly finances in the account.
    • Get the right home loan. The right home loan will ensure that the loan fits with the home buyer and their finances. No matter if a single parent is dealing with new property price caps or trying to purchase land to buy their own home, everyone has different property goals and therefore, different personal objectives.

With the home loan approved, the applicant will then be able to go about purchasing their existing home or building their own home.

As a parent that is without a spouse and has dependent children, it is useful to seek government help if you are looking to buy a property. Attaining a home loan as a single parent has never been easier thanks to the Family Home Guarantee scheme.

As long as an individual aligns with the requirements, they will be an eligible participant, among thousands of other single parents, to get help attaining a home loan in Australia.

Any individual that has a 2% deposit and wants to buy their first home or their tenth home should make an application and once successful, attain a loan from a participating bank. This scheme runs until 30 June 2025 and with 2,500 being accepted each year, it is important to be quick in order to receive help for getting on the property ladder.

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