The Australian government has recently announced a budget approval for a program where single parents can take out their first home loans with just a 2 per cent deposit.
While the program’s objective is well meaning, many experts believe that the program is inherently flawed and is doomed to fail.
What is a Single Parent Family Home Guarantee (SPFHG)?
The Morrison government rolled out last year the Single Parent Family Home Guarantee (SPFHG) scheme with the aim of making home ownership more accessible and affordable to single parents who have not owned a property before.
This scheme is open to eligible Australians who are single parents and are eyeing to buy or build this new house for a special deposit rate. With only 2 percent of the property or project’s cost, qualified applicants can re-enter or participate in the housing market.
Typically, homeowners with less than 20 per cent deposit have to pay for the lenders mortgage insurance (LMI), but with this scheme, that barrier has now been waived.
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This scheme is managed by the National Housing Finance and Investment Corporation (NHFIC), which provides guarantee to up to 15% of the property cost that will be financed by an eligible applicant’s first home loan.
Can you get a home loan on single parent pension?
As the scheme’s extension, with additional 10,000 places that was made available last July 1, 2021, many remain skeptical of its effectiveness.
In fact, a report from News.com.au noted that this scheme will not make first time homeowners’ home ownership much easier. In fact, this does not make home ownership for single parents more accessible, especially those who are living in major cities.
As median housing prices and unit values skyrocketed in major cities over the past months, the scheme, in effect, was rendered useless. This is on top of the fact that the median salary for a woman employee in Australia is not enough to service a loan.
How will it impace home loans in regional Australia?
In fact, the report noted, that the rate of increase in housing prices in key cities such as Canverra, Melbourne, and Perth exceeds the price cap stipulated by the scheme.
We believe that everyone deserves the right to get into home ownership and have a sense of belonging. The price that is paid au threw not be out of service alone or worse losing the little equity that has been hard fought for can be devastating. so please thoroughly review before getting into the situation.
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