Loans and loan programs for single-parent households

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Buying a home on one income, especially with children, can be difficult. But there are resources available to help single parents buy their own homes.

Being a single parent can be difficult, just like buying your own home. Naturally, single parents who want to buy their own home are likely to face certain obstacles. But obstacles can be overcome.

As a single income parent, the dream of owning a home can seem like a distant fantasy. Children are expensive, buying a house is expensive; you got the idea. But there are resources available to help single parents buy their own family home.

Home loans for single parents

While there are no home loans specifically designed for single parents, there are programs to help single parents buy their own property.

Specifically, the Family Home Guarantee Scheme was created to help single parents with dependents build or buy a home with as low as 2% down payment without having to pay Mortgage Loan Insurance (LMI). This could benefit single parents who struggle to save a large 20% down payment to avoid paying LMI – a nearly impossible task for a single-earner with dependent children.

This particular plan is different from most other government plans, which are geared more towards first-time homeowners, as it is available to single parents who may have owned property in the past.

Family home guarantee scheme

From July 1, 2021 to June 30, 2025, 10,000 Family Housing Guarantees are available for single parents with at least one dependent child. Under this program, buyers with a down payment of just 2% will be able to get a home loan without having to pay LMI.

In most cases, people with less than 20% down payment are required to pay LMI. LMI is an insurance policy that protects the lender, not the borrower, against the borrower’s inability to repay their loan. Buyers with a deposit of less than 20% are generally considered “at risk” borrowers, which is why they are required to pay an LMI.

But under this program, participating lenders will be guaranteed by the National Housing Finance and Investment Corporation (NHFIC) up to 18% of the home’s value. This means that single parents using this program do not need to pay LMI if they have at least a 2% deposit, which could save them thousands of dollars.

To be eligible for this plan, you must:

  • Be a single person, that is, a person who has no spouse and / or common-law partner

  • Have at least one dependent child

  • Be an Australian citizen who is at least 18 years old

  • Intend to live in the property

  • Have annual taxable income of $ 125,000 or less for the previous fiscal year (not including any child support)

The types of properties you might consider buying include:

  • An existing house, townhouse or apartment

  • A house and land package

  • Land and separate contract to build a house

  • An off-plan apartment or townhouse

Other help to help single parents buy their first home

In addition to the Family Home Guarantee Scheme, single parents could be eligible for the First Home Loan Deposit Scheme, the New Home Guarantee, or the First Home Super Saver Scheme. These were designed to help people who are buying their first home.

These resources are specifically available to people who are buying their first home. On the other hand, the Family Home Guarantee Scheme can be used both by first-time homeowners and by people re-entering the real estate market.

Most programs and warranties are offered by the Australian government, but what that looks like to you may differ depending on the state or territory you want to purchase from. However, we’ll give you a quick rundown of how they all work.

Home loan first deposit system

From July 1, 2021 to June 30, 2022, there will be 10,000 First Home Loan Deposit Scheme places available for first time buyers. As with the Family Home Guarantee, you will not be required to pay LMI if you have a deposit of at least 5%.

The types of properties you could buy using this program include:

New home warranty

Like the First Home Loan Deposit Scheme, the New Home Guarantee allows first-time buyers to buy a home with a down payment of 5% without having to pay IMT. There are 10,000 places available from July 1, 2021 to June 30, 2022. Unlike the First Home Loan Deposit Scheme, the property to be purchased must be new.

Specifically, the types of brand new properties that you can purchase using this guarantee include:

First Home Super Saver Program

The First Home Super Saver (FHSS) program works a little differently from the program and warranty mentioned above. The FHSS plan lets you use your super fund to save money for your first home. It can help first-time homeowners save faster because of the super “preferential tax treatment”.

Using the program means that you can make voluntary voluntary (pre-tax) and voluntary non-concessional (after-tax) contributions to your super for the purpose of saving for housing. You can then request the release of these funds, along with the associated income, to be used towards the purchase of your first home.

To be eligible for this program, you must be a first owner and the following two statements must apply to you:

  • You will be living in the property you are buying or intend to live in the property you are buying as soon as possible

  • You intend to live in the property for at least six months during the first 12 months that you own it (after moving in)

To use this program, you will need to apply for and receive an FHSS determination before signing the contract for your new home. For more information on this scheme and how it works, visit the Australian Taxation Office (ATO) website.

New real estate price caps

New property price caps were recently announced for the First Home Loan Deposit Scheme and the Family Home Guarantee. Meanwhile, house price caps under the New Home Guarantee remain as they were when the program was launched.

According to Deputy Treasurer Michael Sukkar, these are the current house price caps for the First Home Loan Deposit Program and the Family Home Guarantee as of July 1, 2021.

Capital city

Rest of state

New South Wales

$ 800,000

$ 600,000

CIV

$ 700,000

$ 500,000

QLD

$ 600,000

$ 450,000

Washington

$ 500,000

$ 400,000

HER

$ 500,000

$ 350,000

TAS

$ 500,000

$ 400,000

ACT

$ 500,000

NT

$ 500,000

Source: Trésor

In addition, the price caps for New Housing Guarantee properties remain the same as of October 6, 2020.

Capital city

Rest of state

New South Wales

$ 950,000

$ 600,000

CIV

$ 850,000

$ 550,000

QLD

$ 650,000

$ 500,000

Washington

$ 550,000

$ 400,000

HER

$ 550,000

$ 400,000

TAS

$ 550,000

$ 400,000

ACT

$ 600,000

NT

$ 550,000

Source: Trésor

Tips for single parents looking to buy a home

As a single parent with only one income to work, chances are good that buying a home while managing the life of a single parent will be hard work. However, it is quite possible to buy a house with just one income. Here are some tips for single parents looking to buy their own home.

Take advantage of the diets

We’ve told you what programs are available, but you’ll have to do your own research and apply to reap the benefits. You may want to do some research and find out which programs we have mentioned that you are eligible for. All of the programs we talked about were created to help people buy homes without so many barriers; saving enough money for a 20% deposit is quite difficult at the best of times. So if you can use one or more of the above programs or guarantees, it might be useful. It could save you thousands of dollars.

Save, save, save

Once you are tied to a mortgage, you are in a long term commitment of up to 30 years. Your children will likely grow up and leave home before the end of your mortgage term. Before you sign the dotted line, it might be good to save as much money as you can to keep it safe. In doing so, you can use it to your advantage by having a clearing account, making additional refunds, or simply having money set aside for a rainy day.

Have a good credit rating

Having a good credit score is very important when looking to buy a home on a low income. Making sure you have a good credit rating is essential to ensure that you are charged a low interest rate and that you have the right loan terms. Without good credit behind you, not only is your choice of lenders limited to a few, you will likely have to pay more interest than you would like. More interest = higher repayments = lots of money over time.

Read our article on how to improve your credit score

Buy within your means

If you’re a single parent, chances are you have quite a bit of spending already. If you are strapped for cash, it may be possible to search for a property in an appropriate price range. This could mean that instead of a four bedroom house with a large backyard, you might be more suited to a small apartment in the suburbs in which you are looking to live. Figure out what your borrowing power is and make sure you can actually maintain your loan. Basically make sure you can pay your mortgage payments so you don’t waste your time.


Image by Danielle Macinnes on Unsplash


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