The single parent home buyer scheme: what you should know

The single parent home buyer scheme: what you should know

As property price growth continues to skyrocket across the country, including in regional areas, single parents may be feeling increasingly locked out of the market.

Saving up for a deposit on a single income is incredibly challenging when you consider wage growth fell to its slowest rate on record last year at 1.2 per cent, while April CoreLogic data shows that national dwelling prices grew 7.8 per cent year-on-year.

Single parent households also have lower home ownership rates than other household types, according to a recent article. The article also noted that almost “half of all single-parent families” rent and do not own property, compared to one in four dual-parent families who rent.

However, the 2021-2022 Federal Budget has thrown single parents a lifeline in the form of a tailor-made buyer scheme: The Family Home Guarantee.

What is the Family Home Guarantee?

The Family Home Guarantee (FHG) allows single parents with deposits as small as 2 per cent to be approved for a home loan, with the remaining deposit difference up to 20 per cent covered by the government. For example, a single parent with only a 4 per cent deposit would see the government guarantee the remaining 16 per cent.

This may be incredibly helpful for some would-be buyers, as strict home loan eligibility criteria requires borrowers to typically have a home loan of at least 10-15 per cent to qualify, with a 20 per cent deposit the “ideal” scenario for lenders. This is because a larger deposit showcases a level of financial stability and discipline in a borrower’s savings and reduces the risk that they may default on the loan.

And with the cost of a 20 per cent home loan deposit ballooning into the hundreds of thousands of dollars range – particularly in Sydney and Melbourne – taking this financial pressure off single parents may allow them the chance to purchase property.

Who is eligible for the Family Home Guarantee?

According to the latest Federal Budget, the FHG is available for up to 10,000 single parents with dependent applicants over the next four years.

Applicants must be Australian citizens and 18 years old or older. There is an income cap of $125,000 per household.

The FHG is available from 1 July 2021 and may assist would-be buyers in being approved for a home loan with a deposit as small as 2 per cent.

What are the advantages and disadvantages of the Family Home Guarantee?

The FHG will be crucial in helping single parents to get a foot on the property ladder and secure a home for their family. But it’s important that single parents weigh up the pros and cons of the FHG before considering applying, as there are some risks worth keeping in mind.

Benefits of the Family Home Guarantee

  • Boost your home loan eligibility

The most significant advantage of the FHG is that it allows single parents to boost their chances of home loan approval with a smaller deposit amount. Home loan lenders have strict regulations around who they can offer finance to, and having a sizeable deposit is one of the most common criteria that blocks everyday Aussies from nabbing a mortgage.

Not only is a lender more likely to approve a borrower who has a deposit of 20 per cent, but they may be more likely to be offered a more competitive home loan rate. The FHG sees the government act as guarantor on their deposit up to 20 per cent, increasing the single parent’s chance of approval on the loan.

  • Avoid Lender’s Mortgage Insurance (LMI)

Similarly to the First Home Loan Deposit Scheme, the FHG allows borrowers to have their smaller deposits guaranteed up to 20 per cent of the value of the property. This allows would-be buyers to avoid paying LMI on their mortgage.

Borrowers are expected to pay this insurance to their lender when their deposit is below 20 per cent, and it can easily climb into the tens of thousands of dollars range depending on the property’s value.

While lenders may allow borrowers to add this cost on to their mortgage, by increasing their loan amount they will increase their ongoing repayments and the amount of interest paid over the life of the loan. The FHG sees the government guarantee the remaining portion of their deposit up to 20 per cent, allowing the single parent applicant to avoid this pesky cost.

Risks of the Family Home Guarantee

  • Higher ongoing repayments

Generally speaking, the smaller a borrower’s deposit, the higher their ongoing repayments will be. The government is acting as guarantor on a portion of the applicant’s home loan, but the borrower is still approaching the loan with a deposit of as little as 2 per cent. This means that due to the larger loan amount and interest charges, single parents will be paying significantly more over the life of the loan compared to borrowers with only a 5 or 10 per cent deposit.

RateCity crunched the numbers on mortgage repayments on a $500,000 property over 30 years with a deposit of 2 per cent, versus larger home loan deposit sizes. The research found that borrowers with a 2 per cent deposit were paying significantly more in mortgage repayments.

While this does not mean the single parent applicant should avoid using the FHG, it’s worth keeping in mind that repayments will be higher than if they saved for a larger deposit. However, in the time it takes them to save for a larger deposit, the median dwelling price may have increased as well, often making it a catch-22 decision. Either way, it’s worth running the numbers on a Repayment Calculator to ensure applicants can afford ongoing repayments.

Repayments on a $500,000 property with different deposit sizes

Deposit size Loan amount Monthly repayments Repayments over first year Total repayments
2% $490,000 $2,037 $24,444 $733,285
5% $475,000 $1,975 $23,700 $710,838
10% $450,000 $1,871 $22,452 $673,425
15% $425,000 $1,767 $21,204 $636,013
20% $400,000 $1,663 $19,956 $598,600


Note: Based on hypothetical home loan scenario of a $500,000 property and loan repayments over 30 years. Figures based on current average owner-occupier principal and interest rate of 2.89%. Total repayments figures are for example only and do not factor in interest rate fluctuations over life of loan. Figures do not factor in fees. Data accurate as of 21.05.2021

What other government assistance options are available?

The First Home Guarantee is not the only government scheme available to support would-be buyers in getting a home loan or reducing the costs of purchasing property

There are a range of government schemes, grants, and concessions available which may differ per state or territory. This includes first home buyer schemes and stamp duty reductions or exemptions.

For more information on the types of government assistance that may be available to you – particularly if you are a first home buyer – please read our comprehensive guide.

Talk to a broker about your needs

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Fact Checked -

This article was reviewed by Personal Finance Editor Mark Bristow before it was published as part of RateCity's Fact Check process.



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Learn more about home loans

Can I get a NAB first home loan?

The First Home Loan Deposit Scheme of NAB helps first home buyers purchase a property sooner by reducing the upfront costs required. This scheme is offered based on a Government-backed initiative, with10,000 available places announced in October 2020.

Suppose your application for the NAB first home buyer loan is successful. In that case, you’ll only need to pay a low deposit, between 5 and 20 per cent of the property value and won’t be asked to pay lender's mortgage insurance (LMI). You’ll also receive a limited guarantee from the Australian government to purchase the property.

If you’re applying for the NAB first home buyer home loan as an individual, you need to have earned less than $125,000 in the last financial year. Couples applying for the NAB first home loan need to have earned less than $200,000 to be eligible. To be considered a couple, you need to be married or in a de facto relationship. A parent and child, siblings or friends are not considered a couple when applying for a NAB first home loan.

The NAB First Home Loan Deposit Scheme is currently offered only to purchase a brand new property, rather than an established property.

Can first home buyers apply for an ING home loan?

First home buyers can apply for an ING home loan, but first, they need to select the most suitable home loan product and calculate the initial deposit on their home loan. 

First-time buyers can also use ING’s online tool to estimate the amount they can borrow. ING offers home loan applicants a free property report to look up property value estimates. 

First home loan applicants struggling to understand the terms used may consider looking up ING’s first home buyer guide. Once the home buyer is ready to apply for the loan, they can complete an online application or call ING at 1800 100 258 during regular business hours.

How can I apply for a first home buyers loan with Commonwealth Bank?

Getting a home loan requires planning and research. If you are considering a home loan with the Commonwealth Bank, you can find the information you need in the buying your first home section of the bank’s website.

You can see the steps you should take before applying for the loan and use the calculators to work out how much you can borrow, what your monthly repayments would be and the upfront costs you’d likely pay.

You can also book a time with a Commonwealth first home loan specialist by calling 13 2221.

CommBank publishes a property report that may help you understand the real estate market. The bank has also created a CommBank Property App that you can use to search for property.  The link to download this app is available on the same webpage.

If you are eligible for the First Home Loan Deposit Scheme, CommBank will help you process your application. The scheme helps first home buyers to purchase a home with a low deposit. You can read details about this scheme here and speak with a CommBank home lending specialist to understand your options.

How do I apply for Westpac’s first home buyer loan?

If you’re a first home buyer looking to apply for a home loan with Westpac, they offer an online home loan application. They suggest the application can be completed in about 20 minutes. Based on the information you provide, Westpac will advise you the amount you can borrow and the costs associated with any possible home loan. 

You can use Westpac’s online mortgage calculators to estimate your borrowing power. You can also work out the time it might take to save up for the deposit, and the size of your home loan repayments

When applying for a home loan with Westpac, you’re assigned a home finance manager who can address your concerns and provide information. The manager will also offer guidance on any government grants you may be eligible for. 

What does unconditional approval from Aussie Home Loans mean for first time home buyers?

As an Aussie home loan first time home buyer, your loan application passes through multiple stages. Early in the process, you’ll receive conditional approval, which means the lender approves your loan application as long as you meet certain conditions. Some of these criteria include selling another property or repaying existing debt.

The next stage is unconditional approval which is the final decision from the lender. After considering all the relevant information, the lender is willing to offer you a certain amount to buy a specific property.

Unconditional approval is also known as formal or full approval but receiving this doesn’t mean you need to accept the money. If you choose to proceed and accept the funds, you’ll sign the loan documents to finalise the loan and receive the money. You can, at this time, clarify any doubts you have with your Aussie broker.

You’re likely to get conditional approval, sometimes called pre-approval, when you want to get clear on your budget. You’ll then apply for unconditional or formal approval once you’ve found a property and made an offer. This process will involve the lender reviewing your finances and the details of the property you wish to purchase to make sure you can repay a loan on that property.

As a first time buyer, it may help you with the purchasing process to seek pre-approval or conditional approval. This may speed up the final purchasing process and help you through the home loan process in steps rather than all at once.

How much is the first home buyer's grant?

The first home buyer grant amount will vary depending on what state you’re in and the value of the property that you are purchasing. In general, they start around $10,000 but it is advisable to check your eligibility for the grant as well as how much you are entitled to with your state or territory’s revenue office.

Do first-time home loan applicants qualify for tax benefits?

If you’re a first-time homebuyer applying for a home loan, you could qualify for some tax deductions, but only if your property is a source of income for you. For instance, if you rent out the property, you could get tax deductions on the cost of constructing or renovating it, the loss in value of depreciating assets such as furniture or electrical fixtures, and the home loan interest. 

Homeowners using their property as a residence could also get a tax deduction if a part or all of it is used for business. These deductions include tax write-offs for depreciating assets and deductions for operating expenses like utilities’ payments and service charges for phones and the internet. However, people running businesses from their residences don’t qualify for a tax deduction on the interest paid on their home loans.

Where can I get all the information about an ANZ first home buyer’s loan?

As a first home buyer, you may require help and hand-holding, and as such ANZ has the buying your first home section on its website full of important information. ANZ also has a form in this section you can fill out to get a free consultation from an ANZ First Home Coach and create your own plan for buying your first home. This coach will help you understand where your current income is being spent and plan for your home loan repayments. You’ll get a clear picture of the costs involved in purchasing a property and how to budget or save for these costs. The coach will help you understand different deposit options and manage your accounts to enhance your savings.

There are three types of ANZ first home loans - Standard Variable, Fixed, and Equity Manager. The features, interest rates, and terms for each are different, and you can compare them here.

When they apply for an ANZ home loan, first home buyers can also get guidance on applying for the First Home Owner Grant (FHOG). This is a one-off government grant that may be available to you when you’re buying your first home. The eligibility criteria for FHOG differs between the different states and territories, which is why it’s helpful to have expert advice when applying.

How much deposit do I need for a home loan from ANZ?

Like other mortgage lenders, ANZ often prefers a home loan deposit of 20 per cent or more of the property value when you’re applying for a home loan. It may be possible to get a home loan with a smaller deposit of 10 per cent or even 5 per cent, but there are a few reasons to consider saving a larger deposit if possible:

  • A larger deposit tells a lender that you’re a great saver, which could help increase the chances of your home loan application getting approved.
  • The more money you pay as a deposit, the less you’ll have to borrow in your home loan. This could mean paying off your loan sooner, and being charged less total interest.
  • If your deposit is less than 20 per cent of the property value, you might incur additional costs, such as Lenders Mortgage Insurance (LMI).

How much deposit do I need for a home loan from NAB?

The right deposit size to get a home loan with an Australian lender will depend on the lender’s eligibility criteria and the value of your property.

Generally, lenders look favourably on applicants who save up a 20 per cent deposit for their property This also means applicants do not have to pay Lenders Mortgage Insurance (LMI). However, you may still be able to obtain a mortgage with a 10 - 15 per cent deposit.  

Keep in mind that NAB is one of the participating lenders for the First Home Loan Deposit Scheme, which allows eligible borrowers to buy a property with as low as a 5 per cent deposit without paying the LMI. The Federal Government guarantees up to 15 per cent of the deposit to help first-timers to become homeowners.

What are the pros and cons of no-deposit home loans?

It’s no longer possible to get a no-deposit home loan in Australia. In some circumstances, you might be able to take out a mortgage with a 5 per cent deposit – but before you do so, it’s important to weigh up the pros and cons.

The big advantage of borrowing 95 per cent (also known as a 95 per cent home loan) is that you get to buy your property sooner. That may be particularly important if you plan to purchase in a rising market, where prices are increasing faster than you can accumulate savings.

But 95 per cent home loans also have disadvantages. First, the 95 per cent home loan market is relatively small, so you’ll have fewer options to choose from. Second, you’ll probably have to pay LMI (lender’s mortgage insurance). Third, you’ll probably be charged a higher interest rate. Fourth, the more you borrow, the more you’ll ultimately have to pay in interest. Fifth, if your property declines in value, your mortgage might end up being worth more than your home.

What is a low-deposit home loan?

A low-deposit home loan is a mortgage where you need to borrow more than 80 per cent of the purchase price – in other words, your deposit is less than 20 per cent of the purchase price.

For example, if you want to buy a $500,000 property, you’ll need a low-deposit home loan if your deposit is less than $100,000 and therefore you need to borrow more than $400,000.

As a general rule, you’ll need to pay LMI (lender’s mortgage insurance) if you take out a low-deposit home loan. You can use this LMI calculator to estimate your LMI payment.

How much deposit will I need to buy a house?

A deposit of 20 per cent or more is ideal as it’s typically the amount a lender sees as ‘safe’. Being a safe borrower is a good position to be in as you’ll have a range of lenders to pick from, with some likely to offer up a lower interest rate as a reward. Additionally, a deposit of over 20 per cent usually eliminates the need for lender’s mortgage insurance (LMI) which can add thousands to the cost of buying your home.

While you can get a loan with as little as 5 per cent deposit, it’s definitely not the most advisable way to enter the home loan market. Banks view people with low deposits as ‘high risk’ and often charge higher interest rates as a precaution. The smaller your deposit, the more you’ll also have to pay in LMI as it works on a sliding scale dependent on your deposit size.

Does Australia have no-deposit home loans?

Australia no longer has no-deposit home loans – or 100 per cent home loans as they’re also known – because they’re regarded as too risky.

However, some lenders allow some borrowers to take out mortgages with a 5 per cent deposit.

Another option is to source a deposit from elsewhere – either by using a parental guarantee or by drawing out equity from another property.