Purchasing property with a single income can feel challenging, but when you’re a single parent it may feel more like an uphill battle. However, the dream of home ownership is still achievable thanks to Australian government schemes, grants and concessions that may help you get a foot on the property ladder.
The property market is currently an intimidating prospect for single parents and first time buyers alike. The latest CoreLogic Home Value Index results show that dwelling values were up 1% across the nation for December. For Sydney, the median dwelling value has ballooned by a quarter in just a year, growing by 25.3% to $1,098,412.
And the greatest growth in value annually was recorded in Hobart, rising 28.1% annually to $694,261. While value appreciation has slowed, the median prices of dwellings in capital cities are still at eye-watering levels – especially for a would-be borrower with one income.
If taking out a home loan is at the top of your New Year’s Resolutions list for 2022, you’ll want to arm yourself with the best information possible to boost your chances of approval.
Thankfully, there are several options available to single parents that may help them to gain home loan approval.
Single parent home buyer schemes
There are a number of schemes and concessions available that may assist some eligible single parents in gaining home loan approval. While some may differ per state and territory, it’s worth familiarising yourself with these programs if you’re hoping to boost your chances of loan approval in 2022.
Family Home Guarantee
Announced in the federal budget last year, the Family Home Guarantee scheme (FHG) is targeted directly to single parents, regardless of whether the applicant is a first home buyer or previous homeowner.
The FHG is capped at an income of $125,000, and 10,000 places will be available over four financial years from 1 July 2021 – 30 June 2025. Applicants must be Australian citizens or permanent residents. The FHG may be used for
- An existing house, townhouse or apartment
- House and land package
- Land and separate contract to build a new home
- Off-the-plan apartment or townhouse
It is designed to assist applicants with a deposit as small as 2% to gain loan approval and avoid paying costly lender’s mortgage insurance (LMI). LMI is typically required from borrowers with deposits less than 20% and can climb into the tens of thousands of dollars range, depending on the property value.
Under this scheme, eligible applicants will see their loan guaranteed by the National Housing Finance and Investment Corporation (NHFIC), so that single parents can purchase property without needing such a large deposit.
For example, based on the median dwelling price in Sydney listed above, a single parent would only need to save up a deposit of $21,968. This is considerably more achievable and realistic for someone with one income to save for, compared to a 20% deposit of $219,682, regardless of your financial situation or number of dependent children.
Keep in mind that by saving a smaller deposit, your loan-to-value ratio (LVR) will be higher. A typical home loan will have LVR requirements of between 80-90%, but with a 2% deposit, your LVR will be 98%.
This may mean that your loan repayments are higher than if you were to save a bigger deposit, as you’ll be repaying a larger loan amount over the same loan term (typically 25-30 years). Further, if you want to refinance the mortgage after a few years, you may find that your LVR is higher than the new lenders’ eligibility criteria. Meaning, you may be unable to gain approval for a new mortgage until you’ve repaid more of the loan.
First home buyer grants and schemes
If you’re a single parent and a first home buyer, you may be able to take advantage of one of a number of government schemes targeted to help first-timer’s take a step on the property ladder.
- First Home Super Saver Scheme (FHSSS)
The FHSSS allows eligible applicants to use their superannuation fund to assist them in saving up for a home deposit. This may be a competitive option for would-be borrowers struggling to see significant returns from savings accounts or term deposits in the current low-interest-rate era.
First home buyers make extra contributions into the super fund and can then withdraw up to $30,000 for the purpose of purchasing property. From 1 July 2022 however, this scheme will be increased to $50,000. You may only request a release under the FHSSS once. And you have 12 months from the date you request release of funds to have a signed contract to purchase or construct a home.
- First Home Loan Deposit Scheme (FHLDS)
The original version of the Family Home Guarantee, the FHLDS allows eligible first home buyers to purchase property with a deposit as little as 5%. Under this scheme, the NHFIC acts as a guarantor for the home loan of the eligible first home buyer up to 15% of the property value. Between 1 July 2021 – 30 June 2022, 10,000 FHLDS places will be available. Income caps of $125,000 per annum are also in place for single applicants.
Find out more about the FHLDS here.
- First Home Owner Grant
The First Home Owner Grant (FHOG), first introduced on 1 July 2000, provides a one-off grant to eligible first home buyer applicants. The value of the grant will depend on the state or territory the property is located in, and the property value itself.
Stamp duty concessions and exemptions
Another significant barrier for single parents looking to purchase property can be the cost of stamp duty. It is one of the biggest upfront costs of buying a home outside of the deposit, so finding ways to reduce this cost, or erase it altogether, can be the difference in an applicant purchasing property or not.
Stamp duty concessions and exemptions may be available to you if you are a first home buyer. These concessions and exemptions differ depending on the state or territory where you are purchasing property and the property price itself (price caps may occur). This can range from shaving thousands of dollars off your stamp duty bill to paying $0.
For more information on what concessions or exemptions you may qualify for, please view the applicable State/Territory Revenue Website:
Getting a home loan with a small deposit
If you’ve managed to save up a small deposit, but you’re not necessarily sure you want to use a government scheme, you may be curious about alternatives for gaining loan approval. In this instance, it may be worth looking at lenders that approve borrowers with a deposit less than 20%.
Reduce Home Loans aims to support single parents, as well as other borrowers with smaller deposits, through its competitive Economizer 95 Home Loan. Borrowers may gain loan approval with an LVR between 90-95%, meaning you may only need to save a deposit of 5% to nab your ideal property.
For more information about the Economizer 95 Home Loan, or to discover which home loan options may suit your financial situation, please reach out to one of Reduce Home Loans experts today on 1300 733 823.