What is the new home guarantee program?

new home guarantee program

What is the new home guarantee program?

This program was announced in the 2021-21 Federal Budget Plan and is designed specifically for first-time homebuyers to purchase property with 5% deposits. The government has allocated 10,000 new residences through the First House Loan Deposit Scheme (FHLDS) to guarantee new homes. These 10,000 places are called the First Home Loan Deposit System (New Homes) or FHLDS Apartments. 


The eligibility requirement for the new homes is similar to the existing FHLDS that was announced in 2019. To qualify for the FHLDS (new home guarantee), you must meet the following conditions:

i) Income

You can apply for a new home guarantee program if you are an individual applicant with a taxable income of less than $ 125,000 per year or $ 200,000 for couples in the previous financial year.

For example, any claim filed against FHLDS Homes before June 30, 2022 (the corresponding financial year) will be assessed as the FY 2020-21. To apply for this program, you will need to provide the appropriate Notice of Assessment from ATO for the previous financial year.

ii) Joint applications

Joint applications will only get FHLDS (new home) approval if they are married or in a de facto relationship. However, other joint applicants such as friends, parent/child, siblings, etc., are not accepted.

iii) Real Estate Ownership

To be eligible for this New Home Guarantee scheme, you must be a genuine first homebuyer, which means you don’t own or have no interest in any property in the United States. This includes commercial property, joint ownership, company title property, or investment properties.

iv) Owner-occupied

The New Home Guarantee (FHLDS) is offered to first-time homebuyers who intend to live in their homes. This program is not suitable for an investment property, and you must move into a house within seven months of owning the home and continue to live in the apartment until your home loan is approved. 

v) Deposit

The FHLDS New Homes is available only to first-time homebuyers with a minimum of a 5% deposit. It is designed to help new borrowers enter the market quickly by reducing the need for saving 20% deposit which is typically required. If you deposited a down payment of 20 or more, this program would not be applicable as there will be no need to cover your mortgage.

How does the New Home Guarantee work?

This program allows eligible first-time buyers to purchase or build a new home and apply for a mortgage loan with a 5% down payment without spending on the lender’s mortgage insurance (LMI). 

The New Home Guarantee is administered by the National Housing Fundings and Investment Corporation (NHFIC). If you are successfully approved for the FHLDS New Homes, NHFIC will guarantee the participating creditor to refund approximately 15% of the home appraised value that is being financed. This enables you (as a first-time homebuyer) to obtain a home loan using the 5% deposit without any LMI costs.

Of course, it’s crucial to understand that owning a home and purchasing a mortgaged property involves more than the down payment. During the home purchase process, additional costs may arise, and borrowers must consider these costs in their budget. These expenses include legal fees, pest and building charges, and more.

This is where expert advice and consultation come in. Your local mortgage loan broker works in your best interest. They can help you determine the total cost of your home and avoid the consequences of any unexpected charges down the track. 

What Types of Properties are Eligible?

Since this program is open only to first-time homebuyers who wish to build or purchase newly built properties, specific property types are eligible for this scheme. However, to qualify for the FHLDS New Homes, you need to sign a purchase agreement before the expiry of your 90-day pre-approval letter. 

The following are the property types that are eligible for this program.

1. Newly-constructed properties:

The house has completed construction on January 1, 2020, was not sold as residential premises, leased or rented, and has never been inhabited. 

A property might also qualify if it has been restored to replace a demolished property. Nevertheless, the property must be ready for you to leave the settlement; you are disqualified from the new home guarantee program if you wish to purchase property for substantial improvements or redevelopment. 

2. Off-the-plan houses:

When entering into a contract of sale, the property’s title has not been assigned, or the property cannot be legally occupied. The sales contract must be dated October 7, 2020, or later to be eligible, Also, you must move into the accommodation within six months of the residency certificate being issued.

3. Home and Land Package (or land and private contract for building a house) 

To qualify for an FHLDS, you must enter into an approved building contract signed on or after October 7, 2020. It helps borrowers build a new house, start construction within six months of signing the contract, complete construction within 24 months, and move into the home within six months of receiving their residence permit.

How to apply for this New Home Guarantee program?

All FHLDS new home program applications must be made directly to one of the participating financiers or a mortgage broker. Moreover, Australia currently has 27 participating lenders offering residences under the New Home Loan Guarantee scheme.

Contact your local mortgage options broker today to find out if you are eligible and which lenders are involved in this new home guarantee program.

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