One in three first home buyers use guarantee schemes

Know anyone who wants to buy their first home? A new report confirms that low deposit schemes are getting younger buyers into a place of their own sooner.

First-home buyers are ignoring headlines warning that it can take years to save a deposit.

Instead, they’re flocking to guarantee schemes allowing them to enter the market with just a 5% deposit – and without the cost of lenders’ mortgage insurance (LMI).

NHFIC, which runs the First Home Guarantee schemes set up by the federal government, says that in 2022/23, close to one-in-three first home buyers tapped into the guarantee schemes.

That’s up from one in seven the year before.

In total, 41,700 home buyers got into the market with the help of guarantee schemes last financial year, following an uptick in the number of places available.

Younger Australians are buying a home

What’s especially exciting about NFHIC’s research is that it shows the schemes allow younger buyers to crack the property market.

In 2022/23, more than half of all places in the First Home Guarantee and Regional First Home Buyer Guarantee were taken up by people under 30.

There has also been a fivefold increase in buyers aged 18-24.

Key workers are buying with just a 5% deposit

The low deposit schemes are also helping a growing number of key workers, such as teachers, nurses and social workers, purchase a home.

Around 7,721 guarantees were issued to key workers last financial year. Great news for these essential workers in our community!

Debunking the low deposit myth

The First Home Guarantee has at times attracted criticism. This has largely been around the risks of buying with just a 5% deposit, which can mean taking on a larger loan with higher repayments.

But NFHIC data suggests this hasn’t been a problem.

Fewer than 0.1% of homeowners using the schemes have fallen behind on their loan repayments, which is less than the market average for all buyers with a low deposit loan.

Better still, close to 10,000 scheme borrowers (over 12% of total guarantees issued to date) have already transitioned out of the scheme, with most of these buyers having accumulated enough equity to achieve a loan-to-value ratio (LVR) of less than 80%.

Could you be eligible for a 5% deposit scheme?

If you’re a first-home buyer struggling to save a 20% deposit, it’s good to know there is a pathway to home ownership that can get you into a place of your own sooner.

It can also help you to avoid paying LMI – which can cost you anywhere between $4,000 and $35,000, depending on the property price and your deposit amount.

Conditions apply for the 5% deposit schemes, but new rules mean you can buy with a sibling or mate and still be eligible for this valuable financial helping hand.

With property values rising in many markets across Australia, time is of the essence.

Call us today to see if you can buy a home with a 5% deposit and zero LMI.