By Adam Schutz
Managing Director – Stockdale & Leggo EVR Property Group EVR Business Brokers
Koo Wee Rup, Hastings and Phillip Island


WITH the 2021 federal budget released last week, we were introduced to the new Family Home Guarantee – a helping hand for single parents to enter homeownership with as little as a 2 per cent deposit.

But how does this new policy work and what does it mean long-term?

The FHG is available to single parents meeting selected criteria (being at least 18 and with a taxable income of no more than $125,000 to start), regardless of being first home buyers or re-entering the market after a divorce or family break-down.

Homebuyers currently pay Lenders Mortgage Insurance (LMI) on deposits under 20 per cent of the home’s purchase price. Under the new scheme from July 1, 2021 the government will guarantee up to 18 per cent of the deposit so borrowers won’t have to pay the Lenders Mortgage Insurance.

What is Lenders Mortgage Insurance?

Put simply, it protects the financial institution you borrow from if you default on your home loan and there is a shortfall on the proceeds of the sale of the home. LMI is calculated based on the property’s price and your deposit and added to your loan as a further borrowed amount.

With 50 per cent of single parents currently renting, saving an acceptable deposit amount is near impossible.

The government has recognised there is a growing population ageing with no assets and a reliance on government-funded pensions.

So, it is a short-term solution for a long-term issue to tackle the increase in homelessness amongst predominately ageing single mothers.
With around 125,000 eligible applicants of the one million single-parent families Australia-wide and only 10,000 places available over the next four years, the government has kept their options open, hinting further places would be made available if demand is high and the original 10,000 exhausted.

However, with the 10,000 places not being available all at once and instead spread over the full four-year period, it may leave eligible applicants on waiting lists.

Those with additional eligibility for first homeowner grants will also be able to gain from both schemes to secure their new home, with the government announcing an additional 10,000 spots under the First Home Loan Deposit Scheme, also to be rolled out from July 1, 2021.

With this latest measure designed to fuel the construction industry and boost home ownership, only time will tell if this offering is a long-term game changer or a short-term band-aid solution impacting only a small number of people.