In the 2022 federal budget, the federal government announced a new Regional Home Guarantee (RHG) scheme to boost construction and help homebuyers get onto the property ladder sooner in regional/rural areas. 

Let’s take a closer look at the Regional Home Guarantee – 5% Deposit Scheme and see what it might mean for you.

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On the go? Here’s 30 seconds of take outs:

  • The Regional Home Guarantee (RHG) is an extension of The First Home Guarantee, that gives buyers the ability to purchase a home with a 5% deposit without the need for lenders mortgage insurance (LMI).
  • The RHG applies only to new properties in regional areas.
  • The RHG comes into effect in October 2022 and will continue until 30th June 2025.
  • You must be an Australian citizen or permanent resident aged at least 18 years.
  • Buyers cannot have owned a property for the 5 previous years. 
  • There are income restrictions, see below for full eligibility criteria.

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What is the Regional Home Guarantee?

The Regional Home Guarantee (RHG) is an extension of the First Home Guarantee, previously known as the “First Home Loan Deposit Scheme (FHLDS)” which came into effect on 1st January 2020. That scheme allowed eligible buyers to purchase a property with a smaller deposit of only 5% without the need to take out Lenders’ Mortgage Insurance (LMI). 

This new RHG will allow eligible buyers in regional areas to purchase or build a new property with a similarly low deposit without paying the LMI because the government acts as a guarantor on part of the loan, guaranteeing up to 15% of the purchase price. That means the bank/lenders no longer need to take out this insurance and the savings are passed onto the buyer.

The RHG is only available to first-home buyers or people who haven’t owned a home for at least 5 years. The full eligibility criteria are explained below.

How does the Regional Home Guarantee work?

The Regional Home Guarantee now allows potential buyers to purchase a property with a lower than usual deposit, allowing them to get onto the property market sooner. Usually, borrowers with less than a 20% deposit, i.e., borrowing more than 80% of a property’s value, would be required to pay LMI to protect the lender. 

The government predicts that regional buyers will be able to save up to $32,000 in LMI, a significant saving for all first home buyers.

The Federal Government has allocated 10,000 guarantees a year starting from October 2022 until 30 June 2025. This is in addition to the 35,000 guarantees a year promised under the First Home Guarantee/’FHLDS’. 

Who’s eligible for the Regional Home Guarantee – 5% Deposit Scheme?

To be eligible for the Regional Home Guarantee – 5% Deposit Scheme you must meet these criteria:  

  • You must purchase a new home in a regional location and have saved a 5% deposit.
  • Be a first-time buyer or have not owned a property for at least 5 years. This includes an investment property, commercial property, land/or a company title interest in land in Australia. 
  • You must be at least 18 years of age and an Australian citizen or permanent resident.
  • You cannot have an income of greater than $125,000 as a single person, or more than $200,000 for de-facto/married couples in the previous financial year. This income cap is reassessed every year by the National Housing Finance & Investment Corporation (NHFIC).
  • Outside of marriage/de-facto couples, joint applicants are not eligible (e.g., parent/child, siblings, friends, etc.).
  • You must live in the property within six months of purchase and continue to live there while the home loan is guaranteed under the 5% Deposit Scheme. 

What properties are eligible for the Regional Home Guarantee – 5% Deposit Scheme?

The Regional Home Guarantee is applicable to new homes only. This means that the property must have completed construction on or after 1 January 2020 and cannot have been lived in by anyone previously and/or sold, rented, or leased. 

The exception to this is if the property’s been significantly renovated in place of a demolished property and put on the market in an as-new condition. It doesn’t allow you to buy an old house and do your own renovations.  

Eligible properties include freestanding houses, townhouses or apartments such as:

  • Newly built properties
  • Off-the-plan properties 
  • House and land packages
  • Land and a separate contract to build a new home

Property Price Caps for the Regional Home Guarantee

As per the First Home Guarantee, with the Regional Home Guarantee you can only purchase properties within certain price caps:

State or Territory

Build or purchase newly built home

Capital city & regional centres Rest of state
NSW $950,000 $600,000
VIC $850,000 $550,000
QLD $650,000 $500,000
WA $550,000 $400,000
SA $550,000 $400,000
TAS $550,000 $400,000
ACT $600,000 N/A
NT $550,000 N/A

Source: National Housing Finance & Investment Corporation (NHFIC).

How To Apply the Regional Home Guarantee – 5% Deposit Scheme

Applying for the Regional Home Guarantee – 5% Deposit Scheme is a similar process to the First Home Guarantee. We’ve covered the 5% Deposit Scheme before. Applications must be made directly with one of the 27 participating lenders of the Scheme or via a mortgage broker. 

Capital Properties can put you in touch with a Mortgage Broker to help you with this process. And we know what makes a great Mortgage Broker.

If that’s the good news. What’s the bad news?

While the Regional Home Guarantee – 5% Deposit Scheme is great news for many first home buyers who would otherwise struggle to get on the property ladder, some homebuyers and builders are concerned that the move could mean higher property prices in regional markets.

However, the probability is that it will increase demand for more affordable properties, bringing new life to some less populated areas.

There is also some concern that due to further probable interest rate rises in 2022, even these smaller loans will be more difficult to service. Capital Properties strongly advises that you seek expert advice to help you make the best investment decision for your situation.

If you’re still wondering what the Regional Home Guarantee means for you, then get in touch. As experienced property investors, we can help you navigate the Regional Home Guarantee – 5% Deposit Scheme and any other schemes that can help you invest and work towards your future financial security. 

Book a free Discovery Session today and let’s get started.