A number of requirements must be met to take advantage of the scheme.
Price Limits
The value of the residential property must not exceed the price caps that have been set by the government in your state or regional area. In New South Wales, where property is most expensive, the cap is set at $900,000. In more affordable states such as Tasmania, the maximum price is $450,000.
“The price caps serve as your ceiling—the maximum price you can go for,” says Mardiasmo. “It doesn’t mean you have to go up to the maximum. If you are able to find a property that is lower, then this will serve well in terms of the amount of debt taken.”
Mardiasmo also notes that the caps represent the total value of the property. Buyers who are purchasing a house-and-land package need to be especially mindful of this, as they risk having their application rejected if the price of both is over the maximum limit.
“Sometimes buyers can be caught out with variations in construction contracts if they are purchasing land and then having a separate contract to build a home,” says Mardiasmo. “They could also be caught out if they are buying a house-and-land package, in which the total cost can vary, depending on your choice of inclusions.”
Buyers of these types of properties will need to sign a fixed-price building contract.
Along with the First Home Guarantee, there is also a Regional First Home Buyer Guarantee and a Family Home Guarantee for single parents with at least one dependent child. You can read more about the price limits via this table.
Property Types
There is also some flexibility in terms of the type of property being purchased–however it is essential that the property in question is a residential one. In other words, the applicants will become the owner-occupiers. Investment properties are excluded from the scheme.
Eligible residential properties include:
- an existing house, townhouse or apartment
- a house and land package
- land and a separate contract to build a home
- an off-the-plan apartment or townhouse
Relationship Status
Both singles and couples can benefit from the scheme. Single applicants with a taxable income of up to $125,000 per annum for the previous financial year are eligible, whereas the total income for a couple is $200,000 per annum.
Previously only couples were eligible for the First Home Guarantee if they are married or in a de-facto relationship with each other. However, from July 1, other people buying together, including siblings or friends, will be eligible.
The scheme was also expanded in the October budget to provide support specifically for single parents. There are now 10,000 Family Home Guarantees available for eligible single parents with at least one dependent child who have a deposit of as little as 2%. From July 1, this definition of single parent, will be expanded to include legal guardians, including aunts, uncles and grand-parents.
Loan Requirements
Loans under the First Home Guarantee require scheduled repayments of the principal and interest of the loan for the full period of the agreement.
There are limited exceptions for interest-only loans, which mainly relate to construction lending.
Wage Thresholds
A single person is eligible if they earn $125,000 per year or less, as is a couple who earns a combined $200,000. This must be shown on the Notice of Assessment issued by the Australian Taxation Office.
Deposit Size
To be eligible for the scheme, the minimum deposit size is 5% of the total price of the property. A single parent with children can have a deposit of 2%. The maximum deposit size allowed is 20%.
Source: forbes.com