First Home Guarantee (Formerly First Home Loan Deposit Scheme)

The federal government's First Home Guarantee (previously known as the First Home Loan Deposit Scheme) and the New Home Guarantee schemes both guarantee mortgages for first home buyers who have only saved a 5% deposit, effectively helping you buy sooner without paying lenders mortgage insurance premiums.

The First Home Guarantee (FHG) is offered for new and existing homes, while the New Home Guarantee is only for people building or buying new properties to live in. The schemes' eligibility criteria includes income levels and has limits on the value of the property you're buying.

In the 2022 budget, the federal government announced the scheme would expand, from 10,000 places a year to 35,000.

Need help saving a house deposit? Check out our guide

How do these schemes work?

Here's a basic explanation for the First Home Guarantee and the New Home Guarantee:

• If you've saved 5% of the purchase price of your property the government can guarantee the remaining 15% of the deposit.
• 35,000 places are now available per year under the scheme.
• Property. For both schemes you must be buying or building a home to live in. For the New Home Guarantee you need to be buying a brand-new property or building one.
• You need to borrow the remaining 95%, but you can avoid LMI.
• Your mortgage needs to be an owner-occupied loan with principal-and-interest repayments.
• Eligible first home buyers can't be earning more than $125,000 a year ($200,000 combined for couples).
• The value of eligible homes under the scheme varies by state and city/region (see property value caps below). These caps differ for each scheme.

This scheme will make low deposit home loans cheaper and is administered through Housing Australia, in partnership with a range of lenders.

You can take a quick quiz on Housing Australia's website to see if you're eligible for the scheme.

What are the benefits of these schemes?

The scheme allows you to get a home loan sooner because you only have to save a smaller deposit. 5% deposit home loans already exist, but you need to pay LMI when borrowing more than 80% of a property's value.

With the first home loan deposit scheme you save time, because you can save a 5% deposit in a quarter of the time it would take to save 20%. You also avoid the LMI premiums, which can cost thousands of dollars (you can get LMI estimates using Finder's LMI calculator).

But there is a downside. Saving a smaller deposit and borrowing more money means paying more interest over time. Let's break it down with the example of a $400,000 property and a 5% deposit versus a 20% deposit:

If you wanted to save a 20% deposit you'd need an extra $60,000 (but no LMI). This would equal around 33 months of mortgage repayments with a 5% deposit.

But with a 20% deposit your repayments would be noticeably cheaper, at $1,349 a month. That's $253 a month less.

But what if property values rise fast?

It's impossible to predict, but rising property prices could make the scheme more appealing. If your property rises in value while you're paying it off you're gaining equity (even while paying more interest).

And if you're still saving for that 20% deposit while prices keep rising, the amount of money you'll need to save will only continue to grow over time. You could get stuck.

Finder survey: Did Australians use any government grants or schemes to take out their first home loan?

Who is eligible for the schemes?

Only Australian citizens are eligible (not permanent residents). You will need to be a first home buyer (if you own an investment property you won't be eligible) earning $125,000 ($200,000 for a couple) a year or less.

The scheme is currently only open to buyers who are:

• Buying newly-constructed dwellings
• Buying off-the-plan dwellings
• Buying house and land packages
• Buying land (with a separate contract to build a new home on that land)

Couples must be married or in de facto relationships. Friends or siblings cannot qualify for this scheme together.

Property value caps

To be eligible for the scheme you must be purchasing a property valued at or below the following thresholds:

*A regional centre is defined as a city with a population above 250,000, such as Newcastle, Wollongong or Geelong.

How do I apply for the First Home Guarantee?

You can apply directly with any lender participating in the scheme (see the full list of lenders below). There are 35,000 places available in the 2023/24 financial year.

Which lenders are taking part in the scheme?

According to Housing Australia, the following lenders will participate in the scheme:

Are there other government schemes to help me buyers?

At the state and territory level most governments offer:

• First home owner grants. This is a grant of money that can be used towards your purchase and is often reserved for first home buyers purchasing newly built properties.
• Stamp duty concessions. Many governments waive or discount stamp duty for first home buyers, removing one of the bigger property costs.
• Family Home Guarantee. Under the Family Home Guarantee, eligible single parents can buy homes with 2% deposits and avoid LMI costs while borrowing the remaining 98%.
• The Regional Home Guarantee lets you buy or build a new home in regional Australia with a 5% deposit while avoiding LMI costs.

Federally, there is another government scheme called the First Home Super Saver Scheme. This scheme allows you to make extra contributions to your super and then withdraw them to use for a home loan deposit, with tax minimisation benefits for doing so.

Frequently Asked Questions

• What is a low deposit?

  A low deposit typically refers to a down payment of less than 20% of the property's purchase price. In Australia, it can be as low as 5%, depending on the lender and loan type. These loans generally will require LMI if the deposit is below 20%, unless you qualify for a waiver.

• How much is LMI on a 10% deposit?

  Lenders Mortgage Insurance (LMI) on a 10% deposit varies based on the value of the property. The higher the value of the property the more you pay in LMI.

• What's the lowest deposit for a house?

  The lowest deposit for a house in Australia can 5% of the purchase price, depending on the loan and lender. Some government schemes may allow even lower deposits for eligible buyers.

• Is a 40% deposit good?

  A 40% deposit is excellent as it significantly reduces the loan amount, often eliminates the need for LMI, and can provide better loan terms and interest rates.

Written by

Richard Whitten

Editor

Richard Whitten is a money editor at Finder, and has been covering home loans, property and personal finance for 6+ years. He has written for Yahoo Finance, Money Magazine and Homely; and has appeared on various radio shows nationwide. He holds a Certificate IV in mortgage broking and finance (RG 206), a Tier 1 Generic Knowledge certification and a Tier 2 General Advice Deposit Products (RG 146) certification. See full bio

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Richard has written 562 Finder guides across topics including:

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