How to buy a home using the First Home Guarantee Scheme with a 5% deposit as a first home buyer (eligibility tool below)
What is the First Home Guarantee?
The First Home Guarantee (FHBG) is a scheme provided by the Australian Government to help Australians purchase their first home sooner with a deposit as low as 5% while avoiding expensive lenders mortgage insurance (LMI).
The FHBG is available to eligible first home buyers and property price caps. The scheme is provided by participating lenders and not available at all banks.
There are additional variations of this scheme provided by Housing Australia:
Regional first home buyer guarantee scheme: Supports eligible regional home buyers to buy property with a 5% deposit without paying lender’s mortgage insurance (LMI).
Family home guarantee scheme: Supports eligible single parents or eligible single legal guardians of at least one dependent to buy a home with a 2% deposit without paying lender’s mortgage insurance (LMI).
Who is eligible for the First Home Guarantee?
Eligibility criteria apply:
- First home buyers or not having owned a property in Australia in the past ten years
- Australian citizens or permanent residents
- Singles earning no more than $125,000 before tax (as per last year’s ATO notice of assessment)
- Couples earning no more than $200,000 combined before tax (as per last year’s ATO notice of assessment)
- At least 18 years old
- Start living in the property within 6 months from date of settlement
- Continue to live in the property for as long as your home loan has a guarantee
Notice of Assessment
The First Home guarantee Scheme initiative to support eligible home buyers is income tested which means eligible home buyers will be asked to provide their NOA to confirm they meet the first home guarantee scheme eligibility criteria.
For reserverations of the scheme made between 1 July 2024 to 30 June 2025, the required NOA is the 2023-2024 financial year.
The scheme is administered by Housing Australia, however, any questions regarding the income test should be directed to the participating lender you are applying for a home loan with.
How does the 5% FHG scheme work?
The scheme allows eligible home buyers to purchase a new or established home with a deposit as low as 5% of the property value. The Australian government provides a guarantee to participating lenders for up to 15% of the property value so first home buyers do not have to pay lenders mortgage insurance when applying for their home loan.
What types of properties are eligible?
Eligible properties include:
- Existing houses, townhouses, or apartments and units
- House and land packages
- Land with a separate contract to build a home
- Off-the-plan apartments or townhouses or houses
Eligibility criteria property price caps
The price cap varies by state or territory and whether the property is in a capital city or regional area. For example, in New south Wales, the first home guarantee scheme eligiblity criteria has a $900,0000 price cap for capital cities and regional centres, and $750,000 for other areas.
See the Housing Australia website for a full list of price caps based on location here.
How many places are available in 2024?
Each financial year, the government releases 35,000 FHG places which also includes an allocation for Regional First Home Guarantee and Family Home Guarantee.
How to apply for the First Home Guarantee
- Apply for preapproval via a mortgage broker with any of the participating lenders
- The participating lender will place a reservation for up to 14 days whilet hey assess your preapproval
- After preapproval is granted, you have 90 days to find and purchase a property with the FHG reservation
- The reservation can be extended for a further 90 days if you are unable to purchase a property during the first 90 days
- Once you have signed a contract of sale to purchase a property, your place reservation can be extended for an additional 30 days to ensure it meets your settlement date and time frame
Participating lenders and home loan product options
There are currently 33 participating lenders, including major banks and non-major banks that are part of the scheme to support eligible home buyers.
The major banks are:
The non-major banks are:
- Bank of Us
- Bendigo bank
- Beyond bank
- Border bank
- Community first bank
- Credit union SA
- Defence bank
- Firefighters Mutual bank
- G&C mutual bank
- Gateway bank
- Great Southern bank
- Health Professionals bank
- Indigenous Business Australia
- Illawarra credit union
- imb bank
- Mortgageport
- MyState bank
- Newcastle Permanent
- People’s Choice
- Police bank
- Qbank
- Queensland country bank
- Regional Australia bank
- Teacher’s mutual bank
- The Mutual bank
- Unibank
- Unity bank
- Bank WAW
You can find the latest list of these participating lenders here
Regional First Home Buyer Guarantee
- 5% minimum deposit
- 10,000 places available for 2024-2025 financial year
- Maximum purchase price caps apply
- Visit Housing Australia website for more information here
Family Home Guarantee
- 2% minimum deposit
- 5,000 places available for 2024-2025 financial year
- Maximum purchase price caps apply
- Visit Housing Australia website for more information here
How to apply for the FHG
Eligible home buyers can apply for the First Home Guarantee through participating lenders. Housing Australia will not accept applications directly and does not maintain a waiting list for places under the FHBG.
Can I use the FHG with other first home buyer grants?
Yes you can. There is no restrictions on using the First Home Guarantee with all other available first home buyer grants or scheme. For example, if you are buying a brand new property for $600,000 in NSW, you will buy a home sooner by using the following:
- First Home Owners Grant – $10,000 grant for buying a brand new property up to $600,000
- First Home Buyers Assistance Scheme NSW – full stamp duty waiver, saving $21,529
- First Home Super Saver Scheme – Allowing you to save a deposit for your first home sooner by using tax benefits in your superannuation
Can I still use the FHG if I have more than 5% deposit?
The minimum amount of deposit required to use the government scheme is 5%. The purpose of the government’s home guarantee scheme is to help eligible home buyers purchase without paying lenders mortgage insurance. Therefore, as long as you are borrowing more than 80% of the property value, then you are eligible to use the FHG.
The First Home Guarantee is not a cash guarantee and because of this, some lenders will require you to use all or most of your deposit towards the purchase so the amount the government is guaranteeing can be as low as possible. In other words, if you have 10% deposit for a home loan but only want to use 5% of your deposit towards the property and save the other 5% for furniture, buying a car, whatever else. Some lenders will require to use the full 10% deposit and not give you the flexibility to use the minimum amount of deposit.
When can I remove the first home guarantee scheme from my mortgage?
As soon as the loan amount owing is equal to or less than 80% of your property value, you will be able to remove the guarantee from your mortgage.
For example, you initially borrowed $700,000 home loan against a property value of $800,000. This means you have borrowed 87.5% against the property for your home loan. This is calculated by dividing the loan amount of $700,000 by the property value of $800,000. This is what is known as the loan to value ratio (LVR).
As you pay down your home loan over the next few years, your property value may also increase. So in a few years time, your home loan is now $680,000 and the property value has increased to $850,000. This means, your LVR is now 80%, therefore you can contact your bank to remove the government guarantee from your property.
By removing the guarantee, you are also able to use the property as an investment if you wish too.
Can I rent out my property as an investment property?
The FHG requires you to live in the property as long as the guarantee is in place. If you rent out the property with the guarantee still in place, your home loan will no longer be eligible and you will be required to pay lenders mortgage insurance.
You are free to rent out your property as an investment once you have removed the FHG from your property and mortgage.
Summary of the FHG
- The First Home Guarantee is an Australian low deposit scheme to help eligible home buyers to buy their first home with only a 5% deposit
- This scheme is aimed at helping first home buyers purchase a home sooner by removing the 20% deposit barrier
- This scheme was previously known as the first home loan deposit scheme (FHLDS)
- Aspiring home owners can buy a home by avoid paying lenders mortgage insurance
- There are 35,000 spots available for the 2024-2025 financial year
- You can only apply for this via participating lenders
Check your eligiblity using the Home Guarantee Scheme Eligiblity Tool
The easiest way to check your eligibility is to use the online tool Eligiblity tool
