Help your clients buy their first home using the Regional First Home Buyer Guarantee

Homeownership can be tough for many Australians because of the ongoing housing crisis. Still, it is a dream for many. For those living outside the major metropolitan locations, it can be even more challenging. 

If you have clients who live in regional areas in the country, you can help them apply for the Regional First Home Buyer Guarantee. It is a government initiative created to assist eligible first-time property buyers in entering the property market sooner—particularly those in regional areas. 

In this article, Mortgage Professional Australia will shed light on what the Regional First Home Buyer Guarantee is and how it works. We will talk about its eligibility criteria as well as the application process. We will also give you some tips on how you can best help your clients leverage this government housing scheme. 

What is the Regional First Home Buyer Guarantee? 

The Regional First Home Buyer Guarantee (RFHBG) is a government-backed initiative designed specifically for first-time home buyers in regional areas within the country. This allows them to save for a lower amount than the usual downpayment percentage required by commercial banks, credit unions, and other mortgage lenders. It helps eligible borrowers enter the property market more easily due to a reduced deposit. 

In traditional lending, mortgage providers require a deposit of around 20% to avoid the need for Lenders Mortgage Insurance (LMI). With the Regional First Home Buyer Guarantee, your clients can secure a home loan with as little as a 5% deposit. 

The Australian Government acts as a guarantor for part of the home loan. This decreases the mortgage lender’s risk while eliminating the LMI’s necessity. Such reduction in upfront costs is beneficial for first-time home buyers in regional areas—where the local property markets might differ from those in major cities. 

Want to know more about Regional First Home Buyer Guarantee? Watch this video: 

 
If you’re interested in diving deeper into this government-backed scheme, check out this guide to the Regional First Home Buyer Guarantee. 

Eligibility criteria for first-time home buyers 

To qualify for the Regional First Home Buyer Guarantee, applicants must meet the requirements set by Housing Australia. Understanding these criteria is important for both mortgage brokers and their clients to make sure that the latter qualifies. 

Here is a quick glance at these requirements: 

1. first-time home buyer status  
2. citizenship and residency  
3. income limitations  
4. owner-occupier condition  
5. deposit requirements  
6. regional property requirement  
7. price caps 

Let's talk more about them below: 

1. First-time home buyer status 

Your clients must prove that they are first-time home buyers before applying for the RFHBG. This means that they should not have previously owned or held an interest in any residential property in the country. 

However, there is an exception. Those who have previously owned property more than ten years ago can still be eligible. They must not have an interest in a residential property during the past decade. 

Your clients should also be buying their first residential property in Australia as either an individual or two joint applicants. 

2. Citizenship and residency 

Applicants must be Australian citizens or permanent residents who are residing in the country at the time they take out the home loan. 

3. Income limitations 

There are income caps that your clients must meet to apply for the Regional First Home Buyer Guarantee. For individuals, the annual taxable income should not exceed a specified amount, while joint applicants have a higher income limit. 

These income thresholds are set to target the scheme towards those who are likely to face challenges in saving a large deposit. Documentation such as the Notice of Assessment (NOA) from the Australian Taxation Office is required to prove income. 

4. Owner-occupier condition 

The property bought using the Regional First Home Buyer Guarantee must be your clients’ primary place of residence. This means that they intend to live in the property rather than rent it out as an investment. 

This condition is in place so that the RFHBG will benefit those who want to buy their first home rather than those investing for profit. 

5. Deposit requirements 

A minimum deposit of 5% of the property’s purchase price is required. Participating mortgage lenders are allowed to require a slightly higher deposit depending on individual financial circumstances. However, it must be less than 20%. 

6. Regional property requirement 

The property being purchased must be in a designated regional area. These areas are defined by the government and exclude major metropolitan centres. 

Regional areas covered by the guarantee 

The RFHBG covers the following locations: 

• Statistical Area Level 4 (ASGS SA4 2016) areas in a State or the Northern Territory that are not a capital city of that State or Territory 
• Norfolk Island 
• the Territories of Jervis Bay 
• Christmas Island or Cocos (Keeling) Islands 

Among the places excluded from the guarantee are the greater capital city areas of each state and the Northern Territory. The entire Australian Capital Territory is also not covered. 

Your clients can use Housing Australia’s regional checker to see if their suburb or postcode qualifies for this scheme. 

7. Price caps 

Lastly, the property must be within a specific price range set by the government for the regional area where it is located. Your clients can check the latest price cap using the Property Price Cap tool before proceeding with their application. 

How to apply for the Regional First Home Buyer Guarantee 

For first-time buyers interested in the Regional First Home Buyer Guarantee, understanding the application process is key. Below are the steps that your clients should follow if they wish to apply for this scheme: 

1. save for the down payment  
2. choose a participating mortgage lender  
3. get mortgage pre-approval  
4. focus on regional housing markets  
5. check the regional price caps  
6. finalise the home loan application  
7. complete settlement 

Let's discuss each step one by one: 

1. Save for the down payment 

Before applying, your clients must save at least 5% of the property price as a down payment. Although this is lower than the usual 20% initial deposit, home buyers should still be prepared financially. 

Remind them that a smaller deposit means a larger home loan amount. It also translates to higher monthly repayments. 

2. Choose a participating mortgage lender 

The Regional First Home Buyer Guarantee is available through select mortgage lenders who participate in the scheme. Do your research and compare these participating mortgage lenders to find the best terms for your clients’ unique situations. 

Major banks and some smaller regional lenders might have participated in the scheme. As such, it is important to check which ones are currently authorised to offer the guarantee. 

3. Get mortgage pre-approval 

It is advisable for clients to seek pre-approval for a home loan before starting their property search. Pre-approval gives a clear indication of the loan amount they qualify for. This will also help them set realistic expectations for the price range of properties in their chosen regional area. 

4. Focus on regional housing markets 

Clients should focus on properties located in the designated regional areas that fall within the scheme’s guidelines. To help them, you can: 

• assess the local property markets 
• check recent sales data 
• understand regional price trends 

Doing these and more will help your clients find a property that meets the government’s requirements for this guarantee. 

5. Check the regional price caps 

Each regional area may have a specific price cap under the Regional First Home Buyer Guarantee. Guide your clients to make sure that their chosen property is within this price limit. 

6. Finalise the home loan application 

Once your clients find a suitable property, their chosen participating mortgage lender will assist them in finalising the home loan application. The application process includes: 

• verifying eligibility 
• assessing income 
• confirming the deposit amount 

If approved, the Regional First Home Buyer Guarantee is applied to the mortgage, and your clients can proceed with the purchase.