What Is the First Home Guarantee Scheme?
Buying your first home is an exciting milestone, but saving a 20% deposit can often feel like a major roadblock. For many first-home buyers, this challenge delays homeownership by years. The good news is that with the First Home Guarantee (FHG), it may be possible to buy your first property with just a 5% deposit, without paying Lenders Mortgage Insurance (LMI). This government-backed scheme is designed to make entering the market more achievable and affordable. Below, we’ll explain how the First Home Guarantee works, who it’s for, and how you can apply.
What Is the First Home Guarantee?
The First Home Guarantee is part of the Federal Government’s Home Guarantee Scheme, administered by Housing Australia (formerly NHFIC). It allows eligible first home buyers to purchase a home with as little as a 5% deposit, without needing to pay LMI. Ordinarily, lenders require a 20% deposit or charge LMI to protect themselves if the borrower defaults. Under this scheme, the government acts as a guarantor for up to 15% of the loan, removing the need for LMI altogether. The scheme applies to both new and existing homes and is subject to regional property price caps.
Who Is Eligible?
To access the First Home Guarantee, you must be a first-home buyer who has never owned property in Australia. You must be either an Australian citizen or a permanent resident and meet income thresholds of $125,000 or less for individuals or $200,000 or less for couples. You also need to have at least a 5% deposit in genuine savings and be purchasing a property within the price limits for your state or territory.
What Are the Property Price Caps?
How the First Home Guarantee Helps You Buy Sooner
Let’s consider an example. A first-home buyer in Sydney wanting to purchase a $700,000 property would traditionally need a $140,000 deposit to avoid LMI. If they only had a 5% deposit ($35,000), LMI could add up to $20,000 or more. Under the First Home Guarantee, they could proceed with just the 5% deposit and avoid LMI altogether, allowing them to enter the market years earlier than if they waited to save a full deposit.
What Kind of Properties Are Eligible?
The scheme can be used to purchase various types of properties, including existing houses, townhouses, and apartments, as well as newly built homes, off-the-plan purchases, and house-and-land packages. The property must be used as your primary residence. Investment properties are not eligible under the scheme.
How to Apply
To apply, first ensure you meet the eligibility criteria. You’ll need to confirm your first-home buyer status, citizenship or residency, income level, and savings. The next step is to approach a participating lender or mortgage broker, as not all lenders are part of the scheme. After reviewing your financial position, the lender or broker will help you apply for pre-approval. Once you’re pre-approved, you can begin house hunting with confidence. After you’ve found the right property, your application will be formally assessed before moving to settlement.
Common Questions
Can I use the First Home Guarantee with other grants?
Yes, you can combine the First Home Guarantee with other first-home buyer assistance programs, such as the First Home Owner Grant and stamp duty concessions.
What happens if I save more than a 5% deposit?
You’re not restricted to a 5% deposit—if you have a 10% or 15% deposit, you can still benefit from the scheme by avoiding LMI.
Are there restrictions on selling the home?
You must live in the home for at least 12 months after purchase before selling or renting it out.
How many spots are available each year?
The First Home Guarantee has limited spots! If you’re thinking about applying, act fast before they run out.
Is the First Home Guarantee Right for You?
If you’re eager to get into the property market but don’t have a full 20% deposit, the First Home Guarantee could be a valuable opportunity. By reducing the deposit requirement and eliminating LMI costs, the scheme allows eligible buyers to enter the market sooner and save thousands of dollars in the process. If you're unsure whether you qualify or how to get started, speaking with a mortgage broker can help simplify the process and ensure you're matched with the right lender.
How We Can Help
We’re here to help you determine your eligibility for the First Home Guarantee, compare participating lenders, and guide you through every step of the loan process. From paperwork to pre-approval and settlement, we make the journey to homeownership as smooth and stress-free as possible. If you're ready to explore your options, get in touch today and let’s take the first step together.
